LIBRARY OF CONGRESS. 
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UNITED STATES OF AMERICA. 



A TREATISE 



ON 



BUSINESS LAW, 



WITH 



T0RMS OF ORDINARY LEGAL AND BUSINESS DOCUMENTS. 



DESIGNED FOR USE IN ALL SCHOOLS IN WHICH THE 



Commercial Branches are Taught 



AND AS A 



BOOK OF REFERENCE 



FOR 






* 



I AUG 3 I 
BUSINESS MEN. 






y £-£L 



"*"- 






1891. 



■v\ 



^%<> 



Entered according' to Act of Congress, in the year 1891 T 

By WILLIAMS & ROGERS, 

In the Office of the Librarian of Congress, at Washing-ton, D. C. 



11- do 



E. It. ANDREWS, PRINTER AND BOOKBINDER, 
ROCHESTER, N. Y. 



PKEFAOE. 



The importance of the subject of Business Law as a feature 
of a course of commercial studies is too generally recognized to 
need enforcing here. To what extent it shall be taught and 
what is the best way of teaching it, are the only questions to 
be settled. 

This book has been prepared with a view to providing those 
schools w T hich desire to teach the more important topics in this 
subject a suitable text-book. The work is brief, yet, owing 
to the terseness with which the principles are stated, it is fairly 
comprehensive. It is believed that no other work now in print 
contains so much information on the subject of commercial law 
in so compact a form. 

Legal technicalities have been avoided, except in the list of 
definitions at the end of the book, and the illustrations are of 
the most practical character. 



CONTENTS. 



Introduction _._ 5 

Contracts 6 

Negotiable Paper _ _ 33 

Sales of Personal Property 55 

Agency _____ _ 66 

Partnership _ 72 

Corporations _ _ 77 

Guaranty and Suretyship _ 84 

Common Carriers ___ 89 

Innkeepers ._ 93 

Contracts of Hire 95 

Insurance _ _ _ _ _ 98 

Liens 102 

Pledging of Personal Property .... 104 

Interest and Usury. 106 

Master and Servant 109 

Husband and Wife 114 

Telegraph and Telephone Companies 117 

Patents, Copyrights and Trade Marks. __ 120 

Landed Property _ 124 

Contracts for the Sale of Land 144 

Landlord and Tenant _ _____ 148 

Fixtures 156 

Nuisance 158 

Highways . _ 160 

Definitions of Legal Words and Phrases __ 166 

Business Forms 185 

Index 197 



I^TEODUCTIOTsT. 



The Reason for Commercial Law. — Nations have rules 
governing their conduct with each other, called International 
Laws. Each nation enacts laws, called Statute Laws, govern- 
ing the conduct of its citizens, toward each other as citizens, 
and toward the State. For the same reason, men, in their 
private business transactions and dealings with each other, find 
it necessary to have law to go by. 

The Source of Commercial Law.- It came from Eng- 
land. The colonists brought it with them, and when they 
finally reduced the whole country to English sway the Common 
Law of England became the law of the United States of 
America. 

The Origin of Commercial Law. — Custom brought it 
about. Merchants transacted their business in an accustomed 
way so long that the custom gradually became the law from 
which no man could depart. Men exercised rights in an ac- 
customed way, over articles of personal property or over land, 
for so long a time, that their rights began to be respected by 
others, and finally those rights, including the manner in which 
they had exercised them, became recognized law. 

Statute Law. — It is frequently found that the rules of the 
common law, while adapted to the condition of things in Eng- 
land, will not answer for the United States. The remedy is 
by statute laws. They are laws enacted by the Legislature of 
a State and they overrule the common law. The rules of law 
given in this book are mainly common law rules. There are 
some statutes, however, which have been so universally enacted, 
by the several States, as to constitute almost uniform laws. 
Whenever the common law has thus been abrogated, altered or 
supplemented, a knowledge of the subject matter of the stat- 
ute law is equally necessary. 



\ 



CO^TEACTS. 



"When You Make a Contract. — When you buy or when 
you sell, when you make any kind of a bargain or agreement, 
it is a contract. In short, whenever for a sufficient considera- 
tion, you agree to do or not to do a particular thing, you make 
a contract. You may say that you have made a purchase, or 
have accepted a position, or call it what you may, you have 
simply made a contract. The only question is the particular 
kind. In the first case, it is a contract of sale. In the last 
case, it is a contract of hiring of service. 

Division of Contracts. — Contracts are divided into : 

1. Contracts by specialty, always written. 

f 1. Written, always express. 



2. Parol contracts, <j 

i 



« r\ i -4.1 I 1- Express, or 

I 2. Oral, either, j 2> ^.^ 

*e 



HOW YOU MAY MAKE A CONTRACT. 



By Word of Mouth. — The vast majority of contracts are 
made by means of spoken words and are called oral contracts. 

By Writing*. — When the terms of agreement are put in 
writing or printed or otherwise expressed on paper and signed, 
it is a written contract. 

By Specialty. — If seals are affixed after the signature on a 
written contract, as in a deed or mortgage, it becomes a con- 
tract by specialty. In our day the seal adds very little weight 
to a contract. In the days of old, when men could not read 
or write, and they put their names to a contract by impressing 
their seal in melted wax, it had some practical use. Never- 
theless, the statutes of most States require seals on certain 
classes of instruments, like deeds and mortgages, and when- 
ever required they must be affixed. In some States a scroll 
made with a pen will answer. 



CONTRACTS. 7 

KINDS OF CONTRACTS. 

Oral and Parol Contracts.— Observe the difference between 
oral contracts and parol contracts. Well educated people some- 
times confound them, owing to the similarity in the derivation 
of the two terms. A parol contract is any agreement not 
sealed. It may be written or oral. 

Express and Implied Contracts. — Observe the terms ex- 
press and implied, as applied to contracts. If all the terms 
and conditions of the contract are fully spoken or written it 
will be express. If something is left unsaid, which ought to 
be said in order to make a complete contract, the law will im- 
ply what is unsaid and the contract will be an implied contract. 
If you say to the grocer : "Send me a pound of full cream 
cheese at twenty-five cents per pound and I will pay for it on 
delivery, ?? you make an express contract. If you say : " Send 
me a pound of cheese " there is to be implied that you will pay 
for it, at the market price when it is delivered, and that the 
cheese shall be merchantable cheese. 

Execvited and Executory Contracts. — Observe the differ- 
ence between executed and executory contracts. If you pay for 
the cheese and take it away with you, that is a finished trans- 
action. It is an executed contract. If it is to be sent to your 
house, it is an unfinished contract, or an executory contract. 
It still depends upon the cheese being actually delivered. 
Something remains to be done, and that makes it an executory 
contract. 

THE FOUR ELEMENTS OF A CONTRACT. 
Meaning" of Elements. — This means simply, that there are 
four things, or conditions, which must exist in order to form 
a valid contract. These necessary conditions are : 

1. Parties. 

2. Their consent. 

3. A lawful consideration. 

4. The subject matter. 

PARTIES. 
Their Age. — The parties to a contract must be of full age. 
The law had to fix upon some arbitrary age, before which a 



8 BUSINESS LAW. 

person must be considered an infant or minor, and after which 
an adult, and the age of twenty-one was selected. Some States, 
however, have enacted statutes whereby females, resident there, 
cease to be infants at eighteen. Infants or minors, therefore, 
belong to the class of incompetent persons. 

Incompetent Persons, are persons having no legal capacity 
to make a contract. The reasons for such incapacity and their 
divisions are : 

!1. Infants. 
2. Married women. 
3. Alien enemies. 

( 1. Idiots. 
2. By reason of natural disability, ■< 2. Lunatics, 

( 3. Drunken persons. 



CONTRACTS BY INFANTS, MARRIED WOMEN 
AND ALIEN ENEMIES. 

An Infant's Contracts for Necessaries. — An infant is 
said to be incompetent to make a contract. Contracts for nec- 
essaries are an exception. (1) An infant may buy such articles 
of food and clothing as are proper and necessary for the station 
in life in which he has been brought up and to which he be- 
longs. He may contract for such, (2) board, (3) medical 
attendance, and (4) schooling as are suitable and proper, and 
all such contracts will be binding, to the extent of the fair 
market value of what is furnished. All this is providing his 
parents or guardian unjustly fail to support him. But if he 
run away from home without cause, he is unable to make a 
binding contract. The tradesman who takes advantage of a 
minor and charges him an exorbitant price, cannot lawfully 
collect his bill, even though the minor agrees to pay it; nor 
can the tradesman keep more than the reasonable value, if the 
minor has paid it. The articles purchased must be suitable to 
the minor's station in life. It doesn't stand to reason that the 
son of a day laborer could buy a five hundred dollar watch and 
hind his father to pay for it, notwithstanding his father had 
turned him adrift in the world. 



CONTRACTS. 9 

An Infant Disaffirms or Ratines his contracts on coming 
of age. The law doesn't say he shall not make any contracts 
except those for necessaries. It says that if he does they are 
voidable at his election. Within a reasonable time after coming 
of age he must repudiate them. If it is in his power he must 
restore to the other party whatever he has received from him. 
If he fails to do this he takes the chance of ratifying the con- 
tract by his silence; and he always ratifies it, (1), by expressly 
recognizing it; (2) by partly performing it; and (3) by retain- 
ing the benefit or proceeds of it. 

" Pleading the Baby Act " is the rather inelegant expres- 
sion used by lawyers, when a man who is sued for failing to keep 
an agreement, defends the suit on the ground that he was under 
age when he made it. It is not considered manly or honest. 
The adult person dealing with a minor is bound by the agree- 
ment, and cannot back out on the ground that the other is a 
minor. The minor cannot waive his rights of infancy by any 
possible form of agreement. 

An Infant's Wrong Doings are just as punishable as the 
wrong doings of an adult. For instance, if the infant induce 
an adult to make a bargain with him by fraudulently represent- 
ing to him that he is of age, even though the bargain might 
not be good in law, he is not only bound by it, but is punish- 
able for making it. If he commits an assault and battery he 
is liable in a civil action for damages, and is liable to be pun- 
ished for the crime. 

Contracts of Married Women. — The common law of 
England, as brought over and established by our forefather 
colonists, forbade a married woman to make a contract. An 
unmarried woman of full age could be a party to a contract, 
and so could a widow. A married woman's interests were con- 
sidered to be so thoroughly joined to those of her husband as 
to give her no power to make a contract. It was th,e disability 
of coverture. The woman's legal personality was united and 
merged in that of her husband. 

The Legislatures of most States have since enacted statutes 
doing away with this disability of the wife, to a greater or less 
extent. In nearly all the States a married woman can now 



10 BUSINESS LAW. 

transact and carry on whatever business she chooses in connec- 
tion Avith her estate and her affairs. 

Alien Enemies. — Under the same class as infants and 
married women are alien enemies. Citizens of nations which 
are at war with each other are not allowed to carry on business 
intercourse. The policy of this is to keep the citizens of each 
nation attached to their own country, and to keep their interests 
adverse to the interests of the citizens of the other nations. 

CONTRACTS BY IDIOTS, LUNATICS AND 
DRUNKEN PERSONS. 

Natural Disability is said to be the cause why these per- 
sons cannot make a valid contract.. They cannot understand 
the effect of the agreement and consequently ought not to be 
bound by it. Observe the difference between the contract of 
an idiot and the contract of a lunatic. In the eye of the law 
the idiot is wholly deficient in understanding. He is not sup- 
posed to have a glimmer of reason. It is not ^lways so with a 
lunatic. It is sometimes a pretty nice question, as to when a 
person is a lunatic and incapable of transacting business and 
when he has sufficient reason to understand the nature and 
effect of an agreement, although his mind may not be as clear 
as an ordinary mind. This is the distinction : An idiot is 
devoid of understanding from birth ; a lunatic is born with 
understanding, but has afterward lost it. There is a way, 
therefore, of legally fixing the time when the lunatic has be- 
come such, while such a way is not necessary in the case of an 
idiot. The idiot is incompetent from birth. A lunatic is not 
incompetent until adjudged so by due process of law. His 
contracts and obligations bind him until then. They are valid 
until his insanity has been judicially established, and thence- 
forth he can make no valid bargain. 

Therefore, contracts made before a person has been adjudged 
insane are not absolutely void, but are voidable. They remain 
in full force and effect until they have been disaffirmed by the 
lunatic or his guardian. 

Necessaries. — The same remarks aj>ply to the contracts of 
an idiot or a lunatic, for necessaries, as in case of an infant. 






CONTRACTS. 11 

The law will hold such contracts valid. The same may be said 
of contracts which a lunatic may make during a period called 
a lucid interval, which occurs in some forms of insanity when 
the person is sane for a short time. 

Drunken Persons. — Complete intoxication destroys the 
reason just as much as lunacy or idiocy. The drunken person 
is just as incapable of making a valid bargain, as the lunatic or 
idiot. The drunkard may make a bargain, but it is voidable 
as in the case of a lunatic. It may be ratified or disaffirmed 
when the drunkard becomes sober ; but after he has been ad- 
judged an habitual drunkard, he is as completely incompetent 
as an adjudged lunatic. 

Drunkenness as in case of infancy, is no defense for wrong 
doing. While partial drunkenness does not render one incapa- 
ble of making a contract, yet it is always material when the 
question arises whether the drunkard has been defrauded. 

Committees or Guardians. — The law provides for the 
appointment of representatives of infants, idiots, lunatics and 
drunkards who are called committees or guardians. The j^rop- 
erty and business of the incompetent person is placed in the 
hands of such committees or guardians who are lawful officers 
of the court, and make bargains for the incompetents by and 
under the direction of the court. 

THE CONSENT OF THE PARTIES. 

It takes Two to Make a Bargain. — This is the popular 
way of saying that all the parties to the contract must mutually 
assent to its terms. Mutual assent is the second condition of 
a valid contract. When the parties mutually consent, then 
their minds are said to meet. If one party is misled, intention- 
ally or unintentionally, by the other, or, if there is a clear 
misunderstanding of the terms of the agreement, their minds 
do not meet. There is no assent. One is thinking one way 
while the other thinks another way. This will not make a con- 
tract. Both must think the same way. 

How Minds Meet. — One party makes a proposition ; the 
other accepts it. There is (1) a proposition ; (2) its accept- 
ance or, the assent to it. They are called the offer and ac- 



12 BUSINESS LAW. 

ceptance. The offer is not binding — it has no effect — until it 
is accepted. 

The Acceptance Must be Unqualified. — The minds of the 
parties do not meet if the acceptance is in any way qualified. 
If there are any conditions imposed by the person accepting 
there is no assent, until the conditions have been met or per- 
formed. The parties must assent to the same thing in the 
same sense. 

How the Proposition May be Made and Accepted. — 
(1) By word of mouth, (2) by writing, (3) by signs, (4) by 
silence. Silence gives consent very frequently in every day 
affairs. 

When the Proposition is Accepted. — If the proposition is 
made by mail or telegraph, it is accepted when a letter of ac- 
ceptance is posted or when a telegram of acceptance is left at 
the telegraph office to be forwarded. It may be hours or days 
before the man who makes the offer knows that it has been 
accepted. He must keep it good, even though the letter or 
telegram goes astray and does not reach him. That is his risk. 
If the offer is conditional on an acceptance by return mail, the 
acceptance must be sent by the next mail. If there is no time 
for acceptance stated in the offer, the letter must be posted 
within a reasonable time. If the offer is made by word of 
mouth it should be accepted then and there. If the party who 
makes it goes away, it may be withdrawn, unless time is given 
to think about it. 

The Assent Must he Free-will. — One who is threatened 
with bodily harm or with illegal imprisonment, or stands in fear 
of personal danger, is not bound by his agreement. It is du- 
ress, and he is said to be under duress. He does not make the 
contract of his own free will. Money paid under duress may 
be recovered. Legal imprisonment or confinement, or the fear 
of such, is not duress. 

The Assent Must he Fairly Obtained. — Fraud vitiates or 
makes void every agreement. A contract or the assent to a con- 
tract, obtained by fraud, is voidable. The minds of the parties do 
not meet, when fraud is practiced. The party upon whom the 
fraud has been practiced, may disaffirm the contract immedi- 



CONTRACTS. 13 

ately on discovering the deceit, or he may overlook the fraud 
or deceit and ratify the contract if he chooses. Where there is 
a mutual mistake as to the terms of a contract, the law will 
declare it void on the application of either party. 

Definition of Fraud. — Fraud is any act, sign or language 
which one person uses to obtain an unfair advantage over 
another. It may consist in silence or concealment where an 
explanation ought to be made. It is more frequently active 
misrepresentation. A vendor or seller has no right to remain 
silent about a defect in the property he is selling, which is well 
known to him and cannot be known to the vendee or buyer. 
Especially is this so if the vendee relies on the vendor to com- 
municate the true state of facts. 

Ignorance of Fact and of Law. — The validity of an agree- 
ment depends on whether the parties know what they are agree- 
ing to do. If there is any misunderstanding, there is no assent. 
Their minds do not meet. By misunderstanding is meant, 
ignorance of what a party is agreeing to do, which is ignorance 
of fact. It does not mean ignorance of the legal liability which 
he incurs. That is ignorance of law. 

Illustration. — Suppose that you have a rich uncle in South 
America and you are his only heir at law. He dies but you are 
ignorant of it, and a speculator offers you five hundred dollars 
for your interest in your uncle's estate. It is worth thousands. 
You think that a certainty is better than an uncertainty and 
accept the offer. Your ignorance of your uncle's death is 
ignorance of fact, and you can refuse to carry out the bargain. 
If you know he is dead and that you are his only relation, but 
do not know that you inherit his property, it is ignorance of law. 
You are bound by your agreement. Ignorance of fact excuses. 
Ignorance of law does not excuse. " Every man is presumed 
to know the law." 

THE CONSIDERATION OF A CONTRACT. 

A Lawful Consideration is another necessary condition or 
element of a contract. It is the reason why the parties make 
the contract, or it is the inducement which leads them to bind 
themselves by the contract. An agreement without any con- 



14 BUSINESS LAW. 

sideration to support it, is void. The payment of money by 
one party to the other is most frequently the consideration of 
an agreement. 

A Sufficient Consideration is not necessarily the transfer 
of money. It is either 

1. Good, or 

2. Valuable \ *' f J» enefit to the P romis °r, 

( -2. A. loss, or inconvenience to the promisee. 

A Good Consideration, consists in natural love and affec- 
tion, between near relatives. When natural love and affection 
impels a father to deed a house and lot to his child, there is 
a good consideration for the deed. 

When Sufficient. — A good consideration is sufficient, as 
between the parties, to uphold a contract which has been 
finished. After the father has delivered the deed, he cannot 
get the property back. 

When Insufficient. — (1) A good consideration is insuffi- 
cient when other persons would be defrauded if the contract 
were allowed to stand. The father might deed the place to his 
child, just to put it out of his hands so that his creditors could 
not get it. In that case they could have the deed set aside. 
The rights of third persons intervene. (2) A good considera- 
tion is insufficient to uphold a mere promise to do something. 
It will not uphold an executory agreement. The father may 
promise to deed the place to the child at some future time, 
but he cannot be compelled to keep the promise. 

A Valuable Consideration is either 

1. A benefit to the person making the promise, or, 

2. A loss or inconvenience to the person to whom the prom- 
ise is made. 

The Benefit may be anything of value given or promised 
to be given to, or done or promised to be done, for, the person 
who makes the promise. I may make a bare promise to give 
you a horse. I am not bound to keep it, for there is no con- 
sideration. But if I promise to give you a horse if you will 
cure one of my other horses, I am bound by my part of the con- 
tract, when you perform yours. You may not do the work 
yourself. You may hire a veterinarian. If I am benefited it 
is a consideration for the bargain. 






CONTRACTS, 15 

The Loss or Inconvenience may be anything which costs 
you time, trouble or money. Curing my horse is a loss to you, 
if nothing more than of the time it takes you. "Time is 
money." The cure may be effected in an hour, while the other 
horse I promised you may be a valuable one. I cannot shirk 
my bargain for that reason. It makes no difference how small 
the benefit I receive, or how insignificant the loss you sustain, 
as compared with the thing I promise you. So long as I receive 
the benefit I calculated upon, or so long as you sustain any loss 
whatever of time, trouble or money, there is a valuable consid- 
eration for the contract and I must keep it. 

"The slightest consideration is sufficient for the greatest 
undertaking, " is a legal maxim. 

Observation on Sufficient Considerations. — There are 
many instances of sufficient considerations which do not arise 
in every day business affairs. They are not discussed here, but 
the student should know that there are such. Some of them 
are : The prevention of litigation by compromise ; forbearance 
of legal proceedings ; offering a reward ; trust and confidence 
imposed ; mutual promises ; assignment of chose in action ; 
subscriptions for religious or charitable purposes. They are 
discussed in Kent, Vol. II, marginal page 463. The student 
who desires more information on them can find them there. 

Invalid Considerations. — The fact that you are morally 
bound to carry out an agreement — that there is a moral consid- 
eration or obligation, — does not create a legal obligation. The 
law does not assume to enforce every promise which a man of 
nice honor or strict integrity would feel bound to perform. If 
you voluntarily promise, in good faith, to pay debts which 
your brother has already contracted, you are not legally bound 
to keep the promise except it be in writing. There is no- con- 
sideration. But you are under a moral obligation to carry out 
your promise. Nor are you bound by a promise which has an 
illegal or impossible consideration. 

Failure of Consideration. — Where the consideration total- 
ly fails and what is supposed to be a sufficient consideration, 
proves to be a nullity and of no value, the contract may be 
avoided. At the time of the great blizzard of 1886, an Eastern 



16 BUSINESS LAW. 

capitalist had a cattle ranch in Western Kansas. He sold his 
five thousand head of cattle. The cattle had already perished 
in the blizzard, but it was not known in New York. There 
was a total failure of consideration and the purchasers were 
entitled to have their money refunded. There is a failure of 
consideration in all cases of purchase and sale when — un- 
known to the parties — the thing sold is dead or destroyed at 
the time of the sale. There is a failure of consideration, also, 
when the title to the things sold, fails. For illustration, no 
man can give or get good title to an article which has been 
stolen from the rightful owner, for the title totally fails, and 
with it the consideration. 

THE SUBJECT MATTER. 

Observation. — You have learned, (1) who must be the par- 
ties to a contract, (2) about their assent, and (3) the consid- 
eration. You have learned, also, that the parties must be such 
as can lawfully contract, that their assent must be fully and 
freely given, and fairly obtained, and that there must be either 
a good or a valuable consideration. One thing more and you 
have the four elements or necessary conditions of a contract. 
The fourth element is the subject-matter. 

The Definition. — It is the thing to be done or omitted. A 
short definition, but it tells the whole story. 

What it May Be. — It may be anything lawful. It cannot 
be anything unlawful. It goes without saying that a man can- 
not lawfully agree to do anything unlawful. If he agrees to 
do anything which the law prohibits, or agrees not to do any- 
thing which the law says he must do, the subject matter of the 
agreement is unlawful. The contract is illegal and void. 

Why Illegal. — Because courts are created for the purpose of 
administering law and justice. Their business is to uphold 
private and public morality. They will not enforce an agree- 
ment which is destructive of public or private morals, or 
which is contrary to public policy or fraudulent. 

Instances of Illegal Subject Matter. — Most of the in- 
stances in which a subject matter is illegal, belong to one of 
the following three classes. These three classes — three reasons 



CONTRACTS. 17 

why the subject matter is illegal and their subdivisions — are as 

follows : 

f 1. In restraint of marriage. 

^ A . , v V v 12. In restraint of trade. 
1. Against public policy, s o -n - * • ^ ^ 

& * l J I 3. Perversive 01 justice and gov- 

(^ ernment. 

II. Immoral life or publications. 
2. Sunday desecration. 
3. Bets or wagers. 
( 1. Fraudulent upon either party. 
3. Fraudulent. -< 2. Fraudulent upon third par- 

( ties. 

In Restraint of Marriage. — The law makes marriage an 
easy contract to enter into and a hard one to break. It does so 
because it favors marriage, and because it encourages marriage, 
it discourages everything in restraint of marriage. It says that 
no contract which wholly restrains one from marrying, shall 
be valid. A contract may partially restrain one from marrying 
and not be illegal, but the partial restraint must be reasonable. 
Your father's w T ill may give you a legacy, provided you do not 
marry, say, until you are twenty-five. By that time you ought 
to be able to choose well and avoid a mesalliance. It w r ould 
be a reasonable restraint and the will w r ould be valid. But if 
it left you the legacy provided you never married, it would be 
void as to that provision. On the other hand, a man can leave 
a legacy to his wife on condition that she remain his widow. 
The law seems to be satisfied if a person marries once. 

In Kestraint of Trade. — All kinds of lawful trade conduce 
to the public welfare. Just as the law favors marriage as a 
social institution, so it favors the establishment of diversified 
industrial interests. Contracts which wholly restrain the car- 
rying on of a lawful trade, injure the public welfare. They 
are against public policy, and therefore the law says they are 
void. But just as marriage may be limited or partially re- 
strained, so it is about restraining a trade. The partial restraint 
must be reasonable. It is for a court of justice to say, in view 
of the particular facts, what is a reasonable restraint. 

Suppose you w T anted to buy out a coal business, and wanted 
to fix it so that the seller could not go on supplying the same 



18 BUSINESS LAW. - 

customers, after you. had paid him the consideration. Now 
you may bind him in the contract never to sell coal in the 
same town or city; never to sell coal anywhere for five years; 
never to sell coal to the same customers. He may agree to 
one of these conditions or to all of them. The restraint would 
be legal. But if you bind him never to sell coal anywhere, at 
any time, to any persons, it is a complete restraint upon his 
engaging in his trade again, and the contract is void. He may 
commence delivering coal to the same customers, the next day, 
and you cannot stop him. 

" Corners," "trusts," and "strikes" to control trade or labor 
are unlawful because in restraint of trade. They may be only 
in partial restraint, but the courts usually say they are unrea- 
sonable. If not reasonable they are unlawful. 

Perversive of Justice and Government. — Courts and 
governments are instituted, primarily, for the administration 
of justice and the promotion of the welfare of society. The 
law, therefore, without stultifying itself, could not counte- 
nance contracts which had for their object the perversion of 
the administration of justice and government. Any bargain 
or agreement which has for its direct or indirect object the 
"packing" or "bribing" of a jury, the bribing of a judge, or 
in any other way interfering with the due course of litigation, 
is illegal. For the same reason, a contract is illegal which 
seeks to influence the acts or deliberations of a legislative body. 
An agreement made* with a lobbyist, having for its end the 
improper influencing of legislation, is illegal. 

Contracts Illegal for Immorality. — To this class belong 
agreements for the performance of any immoral act. Agree- 
ments which tend to further the leading of immoral life ; 
agreements for the distribution or publication of obscene books 
or pictures; agreements made on Sunday, since they are regarded 
as a desecration of the Lord's Day. In some of the States, 
however, the statutes against worldly labor or business on the 
Sabbath, prohibit only the open transaction of business. 

By the common law, wagers on a prize fight or a clog fight, 
and others of that nature, which have an immoral and demoral- 
izing tendency are illegal. In many of the States, statutes have 



CONTRACTS. 19 

been enacted extending the illegality to betting and. gambling 
of all kmds, so that by these statutes, all contracts for the pay- 
ment of money or the delivery of property, which hinge upon 
any chance or uncertain event, are void. If money has been 
paid into the hands of a stakeholder or to the winner, it can be 
recovered by the person paying it. 

Stock and Grain Gambling. — This is a business commonly 
conducted by a class of persons called stock or grain "brokers." 
As ordinarily conducted, it consists in the selling of " options;" 
also called "'puts" and "calls." An "option" is a contract 
in which one person, who is called the customer, agrees to pur- 
chase of the other party to the contract, who is usually the 
broker, a certain number of bushels of grain or shares of stock, 
to*be delivered at a future day. The mere fact that the prop- 
erty is purchased to be delivered at a future day does not make 
the contract illegal, provided the parties really intend that it 
shall be delivered and paid for. If it is the intention that the 
grain or stock shall not be actually delivered and paid for, but 
that when the time arrives at which it was to be delivered, one 
of the parties is to pay the other the difference in the price of 
the stock, as it stands that day, compared with the day when 
the sale was made, the arrangement is a gambling contract, 
and void. It is simply a wager or bet on the rise or fall in the 
price of the particular kind of grain or stock agreed upon. 
The contract is void by common law, even though there is no 
statute in the State where it is made, against gaming and 
betting. 

Contracts Illegal for Fraud. — The general rule is that 
fraud renders absolutely void all contracts into which it enters. 
It follows that where both parties to a contract are guilty of 
fraud, neither of them can derive any benefit from it, and 
neither can enforce it against the other. If only one of the 
parties is guilty of fraud, it is enforcible or voidable at the 
option of the innocent party. If he chooses to rescind it, 
however, he must do so within a reasonable time after dis- 
covering the fraud practiced upon him, and he must also return 
whatever benefit he may have derived from the contract. 

A contract may also be void because its object is to defraud 



20 BUSINESS LAW. 

a third person. It is then said to be fraudulent upon third 
parties. For instance, if an auctioneer, or the owner of prop- 
erty about to be put up at auction, secretly arranges with 
another person to stand by during the progress of the auction 
and bid on the articles put up without the intention of buying 
them, a fraud is committed on the honest bidders. Upon 
learning of it they can refuse to accept articles struck off to 
them, or can return articles which they have accepted and 
demand the price paid. Contracts perversive of the insolvent 
laws are illegal. Fraudulent assignments and fraudulent sales 
come within the same class, and in short, whenever two or more 
parties agree among themselves to do any act which will deceive 
or defraud a third person, the agreement is illegal and void. 

STATUTE OF FRAUDS. 

Its Nature. — It is a Statute which has been enacted by 
the Legislatures of nearly all the American States. It is pat- 
terned after an old English Statute, enacted by Parliament in 
the reign of Charles II., which was called "The Statute of 
Frauds and Perjuries." The object of the Statute of Frauds 
is to prevent frauds, which it does by compelling men to reduce 
some kinds of contracts to writing. It is not very easy to com- 
mit fraud where a contract has been put in writing, If a con- 
tract is not put in writing the contracting parties must rely 
upon the memory for the terms of the contract. There is then 
a temptation to commit fraud or perjury. 

What it Requires. — Its chief requirement is that the va- 
rious kinds of contracts which it specifies, shall be in writing. 

The Contracts which it Requires to be in Writing. — 
It requires that the following classes of. contracts shall be in 
writing and signed by the contracting parties : 

1. Leases of land for more than one year. 

2. Every contract for the sale of lands or any interest in 
lands. 

3. Every agreement that by its terms is not to be per- 
formed within one year from the making of it. 

4. Every special promise to answer for the debt, default 
or miscarriage of another person. 



CONTRACTS. 21 

5. Every agreement, promise or undertaking made upon 
consideration of marriage, except mutual promises to marry. 

G. Contracts for the sale of personal property involving 
more than fifty dollars, unless, 

(1) Some part of the property shall be delivered, or 

(2) Some part of the purchase price be paid, or 

(3) The sale be by auction. 

What is Sufficient Writing. — It is not necessary to have 
a technically prepared legal document. The Statute says 
that the agreement or contract, "or some note or memoran- 
dum thereof," must be in writing and signed by the party to 
be charged therewith. Hence, a note or memorandum is suffi- 
cient. An ordinary business letter is sufficient, provided it ex- 
presses the understanding of the parties. 

Leases and Contracts for the Sale of Land. — These are 
the first and second classes of contracts which must be in 
writing. It is absolutely necessary that agreements relating 
to real estate should be in writing. 

Agreements Xot to be Performed within One Year. — 
This refers to an agreement which by its terms is not to be 
performed within one year rom the making of it. If you en- 
gage to take a situation after you have finished your studies, 
and it is agreed that you are to have a year in which to finish 
them, then the contract is not to be performed within a year 
from the time it is made, and it is voidable. There is nothing 
illegal about it, but you cannot compel the other party to accept 
your services, and he cannot compel you to work for him, unless 
the agreement is put in writing. 

Promises to Answer for the Debt of Another. — It fre- 
quently happens that a creditor who has a claim against 
one who is not financially responsible, tries to collect it from 
another person, perhaps a relative, who is financially responsible. 
This gives rise to great hardshijDS. To prevent this wrong the 
Statute enacts that a promise to pay the debt of another must 
be in writing. If your friend owes some one, and you accom- 
modatingly tell the creditor you will pay it, while you are 
morally bound to do so, you are not legally bound, unless you 
make the promise in writing. If you agree to become respon- 



22 BUSINESS LAW. 

sible for goods supplied to your friend before the sale has been 
made, your oral promise is sufficient. The debt has not been 
contracted. After the sale has been made, then the debt is 
contracted, and your promise to pay it must be in writing. 

Promises in Consideration of Marriage. — This does not 
refer to engagements or "mutual promises to marry." Such 
promises are excepted by the Statute. It refers to such agree- 
ments as are sometimes made regarding the disposition of prop- 
erty in contemplation of marriage. Marriage settlements come 
under this class. They are promises by one of the parties 
about to wed to give the other certain property in consideration 
of the marriage. All such promises are void unless in writing 
and signed. 

Contracts for the Sale of Personal Property. — This pro- 
vision will be referred to under the title, " Sales of Personal 
Property." As the Statute of Frauds is enacted in some States, 
it necessitates a written contract only where the property in- 
volved is valued at more than thirty dollars. 

SOME HINTS ABOUT MAKING CONTRACTS. 

(1) Make your Meaning' Plain, especially if you are 
making a contract in writing, for the courts will presume that 
the writing expresses all the terms of the agreement. You 
will not be allowed to say that there was any understanding 
different from the plain language of the writing. 

(2) Have your Intentions Expressed. — It is not very ma- 
terial whether the language is grammatical or whether the 
contract is written after the proper legal form. It is material, 
however, that the intention of the parties be clearly expressed. 
If it were always done many a law suit would be saved. 

(3) Avoid Doubtful Terms and Technical Words. — If 
there is a doubt as to the intention of the parties it will be 
presumed that the words are used according to their usual 
meaning, although the parties may have intended that the 
words should have a different meaning. 

Remember, (1.) That a contract which is lawful in the 
place where it is made is lawful everywhere; (2) That a con- 
tract which is void and illegal in the place where it is made is 



CONTRACTS. 23 

void and illegal everywhere; (3) That if a contract is to be 
performed in a place other than where made, it must also stand 
the test of the laws of the place where it is to be performed. 

PAYMENT AND TENDER. 

Payment in Money. — A debtor must pay his creditor in 
that form of money known as legal tender, if the creditor re- 
quires it. It is called legal tender, because it may be legally 
tendered in payment of debts. It is such money as Congress 
may from time to time declare to be a legal tender for the pay- 
ment of debts. Congress alone has power to say what kind of 
money shall be legal tender. It can limit the amount to which 
any particular kind of money shall be legal tender. Thus 
you cannot oblige your creditor to take more than ten dollars 
in silver coin of less than one dollar, nor more than twenty-five 
cents in pennies or nickels. Congress could make the National 
bank bills legal tender but it has never done so. Most cred- 
itors are glad to get them, and do not object because they are 
not legal tender. The common forms of legal tender for un- 
limited amounts, are gold, silver (dollars), and United States 
treasury notes. 

Payment in Property. — A debt may be paid in property 
when that form of payment has been expressly agreed upon. 
If nothing is said about the form of payment it must always be 
in money. If you agree to pay in property you must deliver it 
at the time and in the manner agreed upon, or your creditor 
will not be bound to take it. He can demand money instead. 

Payment by Note. — Giving a note for a debt is not paying 
it. But the parties may agree that it shall act as a payment 
and the debt itself will then be paid. The note takes the place 
of the debt. Very frequently a debtor gives his creditor the 
note of a third party. Neither is this a payment of the debt 
unless it is so agreed. But if you hold John "Doe's note and 
"turn it over," that is give it for a bill of goods, and it is 
accepted in payment, the seller must collect of John Doe. If 
the note proves to be worthless, it is not your loss, unless you 
indorsed it. 

Manner of 3Iaking Payments. — In every case it is the 



24 BUSINESS LAW. 

duty of the debtor to seek the creditor and pay him, unless the 
parties have agreed upon a place of payment. The creditor is 
not bound to go to the debtor and ask for payment. If a debt 
is not paid when due the creditor can immediately commence 
suit. If there is any one duly authorized to represent the 
creditor, the debtor may pay to such a person and avoid hunt- 
ing up the creditor. Payment to an attorney is sufficient 
where the debt is in litigation. If the creditor directs that 
the money be sent by mail or by any other conveyance, and the 
instructions are carefully followed, the debt will be discharged, 
although the money may never reach its destination. 

Presumption of Payment. — There are cases where the 
debtor, in case of litigation, need not prove that he has paid 
the debt. The burden of proof is on the creditor to show that 
it has not been paid. Among such cases are: (1) possession by 
the debtor of his written agreement to pay; (2) possession of an 
order or draft by the person upon whom it is drawn; (3) posses- 
sion of a receipt by the debtor; (4) lapse of time; (5) certain 
subsequent dealings between the parties. 

(1 & 2) Possession of Agreement or Draft. — If you 
are sued for the amount of a promissory note, and upon the 
trial you produce the note in your possession, it is quite reason- 
able to presume that you have paid it. If you have given a 
draft or order requiring the payment of money, and the person 
upon whom the draft or order is drawn, produces it, its posses- 
sion is presumption of payment. In such cases it would be 
presumed that the debt is paid. 

(3) Possession of Receipt. — A receipt for money or prop- 
erty furnishes a strong presumption that the money has been 
paid, or the property delivered. But possession of a receipt 
may be explained so that it will lose its force. For instance, a 
shipper by railroad is usually obliged to sign a receipt for the 
goods before they have been delivered to him. He will be 
allowed to show that after he had received them and examined 
them they were not in good condition or were missing in part. 
An employee of a large corporation may be obliged to sign the 
pay roll before he receives his money. His signature does not 
bind him. He may show that he did not get the whole of his pay. 



CONTRACTS. 25 

Observation. — A systematic business man always takes a 
receipt or voucher in some shape for every payment of money, 
and preserves them in a systematic manner for future reference. 

(4: & 5) Lapse of Time and Subsequent Dealings. — 

Where no demand is made for the payment of a debt, and no 
suit commenced to recover it for twenty years or upwards, it is 
reasonable to presume that the debt has been paid. Such is 
the law in most of the States. It should be so, because after 
such a lapse of time it would be difficult for the debtor, owing 
to the death of witnesses, or otherwise, to prove the payment. 
And likewise where two persons have a running account between 
them, and one gives to the other his promissory note for the 
balance, the transaction is presumptive evidence of a full set- 
tlement of their accounts up to the time the note was given. 

Application of Payments. — A debtor may owe his creditor 
distinct debts arising upon distinct transactions. If the debtor 
makes a payment, and there is no express agreement as to the 
debt upon which it shall be applied, that payment is applied 
as follows : 

(1) Where all the debts are due when the payment is made, 
the creditor may apply it to any debt he pleases. Of course if 
the creditor received the payment with a direction from the 
debtor as to its application, the creditor is bound to apply it as 
directed. 

(2) If the debtor gives no express direction, but the circum- 
stances are sufficient to show his intention, the creditor is 
bound to follow such intention. For instance, if the debtor 
should pay a sum exactly equal to one of the debts, the circum- 
stance would be sufficient to show his intention of paying that 
debt. 

(3) If neither party applies the payment, the law will make 
such an application according to the presumed intention of the 
parties and the justice of the case. Ordinarily the payment 
will be applied to the oldest debt. But a legal debt will be 
paid in preference to one that is illegal, and interest will be 
paid in preference to principal. 

Tender of Payment. — It is an offer to pay the amount of a 
debt. It is usually resorted to by the debtor when there is a 



26 BUSINESS LAW. 

dispute as to the amount. If the debtor concedes that there is 
a certain amount due, and desires to escape liability for interest 
or costs, if sued, he tenders such an amount. He is not liable 
for interest or costs thereafter, provided he tenders enough. 
There are certain formalities connected with a tender which 
must be strictly followed. 

(1) The debtor must produce the money and offer it to the 
creditor. It is not enough to have it in the pocket or to say, 
" I am ready to pay you." 

(2) Enough money must be offered to pay the debt, other- 
wise the tender is useless. If the creditor should recover in a 
suit more than was offered, he will recover interest and costs 
also. 

(3) The identical money which was tendered must be put 
aside and kept intact. It must be ready for the creditor at any 
time he may call for it. It is his money, and not the money of 
the man who tenders it. If a suit is commenced the identical 
money must be taken into court. 

(4) The offer of the money must be absolute. No condi- 
tion can be attached to its delivery. Not even a receipt can be 
demanded, except that if it is in payment of negotiable paper, 
the paper can be demanded. 

(5) The tender must be made to the creditor in. person 
unless there is some one duly authorized to represent him. A 
tender to one member of a firm is sufficient, as is also a tender 
to one of several joint creditors. 

(6) The tender must be made in that form of money which 
has the quality of legal tender, unless the creditor waives that 
requirement. 

(7) If the debtor is not sure as to the amount of the debt, 
it is frequently the case in practice for him to lay down a sum 
in excess. If the creditor takes more than is actually due him, 
he is liable for the excess taken. 

Tender of Property, — One party to a contract may perform 
his duty by making a tender of property. He may offer to 
deliver securities, or he may offer to deliver property which he 
has agreed to manufacture, or he may offer to perform services. 
The formalities are less strict than in case of a tender of monev. 



CONTRACTS. 2? 

An honest offer of performance is usually sufficient. The 
tender of property is frequently necessary in order to create 
performance. 

OUTLAWED-DEBTS. 

The Reason for Them. — It is the policy of the law to enforce 
those rules which will dispense with litigation and promote jus- 
tice. We have already seen that after the lapse of time there 
is a presumption that claims have been paid. To enforce this 
presumption and prevent the revival and litigation of old and 
stale claims, there is a statute which says that a claim or debt 
will outlaw unless it is sued within a fixed time. This statute 
has been enacted in nearly all the States in the Union. It is 
called: 

The Statute of Limitations. — It limits the time to sue. It 
does not make a claim or debt void. There is always a moral 
obligation to pay an outlawed debt, although the creditor can- 
not sue for it. The statute is similar in nearly all the States, 
with the exception that the time in which a suit must be 
brought, differs slightly. In most cases demands arising out 
of simple contracts not under seal, such as promissory notes, 
book accounts, and the like, are outlawed after six years. 
Moreover, the statute is not limited to demands upon contracts 
but extends to damages for wrongs, such as injuries to person 
or property. The statute usually provides that demands of 
the latter nature shall outlaw sooner than contract demands. 

How the Time is Computed. — It is important to ascertain 
when the period of six years commences. In general it may be 
said to commence at the time the debt is due, or from the time 
a suit might have been begun. In the case of a promissory 
note it would be at the time the note matures. Where there 
is a running account between parties, it begins at the date of 
the last item in the account. As between a merchant and a 
customer, where the merchant has been furnishing goods for 
a number of years, and the customer making payments, the 
balance remaining due from the customer will be outlawed 
within six years after the last time goods were furnished, or 
the last time a payment was made. 

Disability of the Creditor. — It may happen that the debt 



28 BUSINESS LAW. 

may belong to one who is under some legal disability, as an 
infant, a lunatic, or an habitual drunkard. The six years will 
commence when the infant becomes of age, or the lunatic or 
drunkard recovers. If the creditor is imprisoned or absent from 
the country, it will begin when he is released or returns. The 
disability, whatever it is, must actually exist at the time the 
debt becomes due, or the right to sue arises. 

Absence of the Debtor. — If the debtor is absent from the 
country when the debt becomes due, of course the creditor 
could not sue him, and therefore would not have his full six 
years within which to collect the debt. The time does not 
begin, therefore, until the debtor returns within the jurisdic- 
tion of the courts of the State where the cause of action arises. 
Absence from that State is usually sufficient to keep the time 
from running. 

New Promise and Part Payment. — After the debt has 
outlawed it may be revived by a new promise to pay. In some 
of the States the new promise must be in writing and signed by 
the debtor. In many States a mere verbal promise is sufficient. 
An acknowledgment of the debt is not sufficient. There must 
be a promise to pay it. Likewise, after a debt has outlawed, if 
the debtor pays any part of the principal or interest, the whole 
debt is revived. The period of six years commences again 
from the time of the payment. The payment may be made by 
delivering personal property, or it may be made by giving a 
note. If the note is for less than the amount of the debt, the 
whole debt will not be revived unless there is a distinct under- 
standing that the note is a part payment. The payment must 
be made by the debtor or by his authority. Where there are 
several debtors jointly responsible, it is the rule in some States, 
that a payment by one will not revive the debt as to the others. 

Set-off and Recoupment. — Set-off is called, in some States, 
a counter-claim. It arises where parties to a lawsuit have 
mutual claims. The defendant is allowed to set-off his claim 
against that of the plaintiff. If the defendant's claim proves 
to be greater than the plaintiff's, the defendant may procure 
judgment against the plaintiff for the excess. Kecoupment is 
a diminution of damages sought to be recovered in an action. 



CONTRACTS. 29 

A man who is sued for the purchase price of goods which were 
warranted merchantable, may claim that the goods were not 
merchantable, and therefore there was a breach of warranty. 
He recoupes his damages. His damages amount to the differ- 
ence between the value of the goods, had they proved to be 
as warranted, and their value as actually delivered to him. 
Unlike a case of set-off, he cannot show that his damages are 
greater than the purchase price. 

ACTIONS, DEFENSES AND DAMAGES. 

A Cause of Action. — For every wrong the law is supposed 
to have a remedy. When one jmrty to a contract breaks it, the 
other party has a right to sue. He has a cause of action. If 
he sues because his opponent has broken a contract, it is an 
action for breach of contract. If a man fails to pay his note 
at maturity, or fails to pay his grocer or tailor bill, or fails to 
do whatever he has agreed to do, there is a breach of contract, 
and the other party has a cause of action for a breach of con- 
tract. Likewise when a man does what is forbidden, and 
thereby injures another, the injured person has a remedy. He 
has a cause of action for the wrong done him. It is called an 
action in tort. The word tort is from the Latin tortus, mean- 
ing twisted or crooked, and it means a wrong or injury because 
it is crooked, and contrary to that which is right and straight. 
Every action not founded upon a contract, is an action in tort. 

A Defense. — But the man w r ho is sued, called the defendant, 
may have some rights on his side. He may claim that the man 
who sues, called the plaintiff, is not entitled to relief. These 
rights, whatever they are, constitute his defense. For instance, 
he may claim that he has performed the contract on his part 
and the plaintiff has not. He may claim that he has made 
payment, or that there has been a balance struck and a settle- 
ment made, or that the matter was left out to arbitration, or 
that he made a tender, or that the matter is outlawed. He 
may also admit the facts claimed by the plaintiff, and set forth 
demands in his favor against the plaintiff, called counter- 
claims. If his demands are valid, they will be set off against 
the plaintiff's demands. 



30 BUSINESS LAW. 

Damages for Breach of Contract. — A man who has broken 
his contract is liable to pay damages to the other contracting 
party. Damages is the compensation which the injured party 
receives. It is such a sum of money as will reasonably and 
fairly compensate the injured party. If the breach of con- 
tract is simply a failure to pay money when due, the damages 
amounts to the sum agreed to be paid, with interest from the 
time it was due. If the action is for a breach of a contract to 
sell or purchase goods, the damages consists of the difference 
between the purchase price and the market value of the same 
kind of goods at the time they were agreed to be delivered. 

Specific Performance of Contract. — Sometimes the courts 
compel a man to perform his contract specifically, if the other 
party desires that, rather than damages. If one man agrees to 
sell land to another, and afterwards backs out or fails to keep 
his agreement, the purchaser can either ask for damages or ask 
the court to compel the seller to make a deed. 

Liquidated or Exemplary Damages. — When the parties to 
a contract agree that in case either fails to perform it he shall 
pay the other a certain sum, that is called liquidated damages. 
The injured party can usually recover in an action no more 
than the sum which was agreed upon; and again there are some 
cases where a man who has been guilty of some wrong doing is 
bound to pay more than the actual damages suffered by liis oppo- 
nent. This additional sum is called smart money, or exemplary 
damages. It is not allowed for a simple breach of contract, out 
only in cases where there has been some willful or malicious 
wrong* done. 



*& 



QUESTIONS. 

Page 5. — What is the necessity for commercial law? How came it to 
be established in this country? Where did it originate? What is statute 
law? What is its purpose? What is its effect upon the common law? 

Page 6. — What is a contract? In what three forms are contracts made? 

Page 7. — What is the difference between oral and parol contracts? 
What is an oral contract? What is a written contract? What is a con- 
tract by specialty? Distinguish between express and implied contracts? 
Distinguish between executed and executory contracts? What are the 
four elements of a contract? 



CONTRACTS. 31 

Page 8. — What is meant by an incompetent person? What parties are 
incompetent by reason of (a) legal disability? (b) natural disability? What 
are the necessaries for which an infant can contract? 

Page 9. — When does au infant ratify a contract? When must he repu- 
diate a contract? Under what circumstances is he liable for wrong doing 
and fraud? Was a married woman competent to make contracts by the 
common law? Has the common law rule in this regard been changed, 
and how? 

Page 10. — What is the purpose of the rule that alien enemies are not 
competent to make contracts? Distinguish between the contract of an 
idiot and the contract of a lunatic? What contracts made by idiots, luna- 
tics and drunken persons are valid? 

Page 11. — To what extent is drunkenness a defense against punishment 
for wrong doing? What is the name applied to persons appointed to care 
for the persons and property of incompetents? What is mutual assent? 
Under what circumstances will mutual assent be binding on the part of 
the parties to a contract? How do minds meet? 

Page 12.— How may a proposition be made and accepted? Under what 
circumstances may a proposition be withdrawn? What is duress? Is 
legal imprisonment duress? What effect does fraud have upon an agree- 
ment? If fraud has been practiced by one of the contracting parties, what 
may he do? 

Page 13. — What is fraud? What is ignorance of fact? What is ignor- 
ance of law? What is the consideration of a contract? What is the result 
if there is no consideration? 

Page 14. — What is a sufficient consideration? What is a good consid- 
eration? When is a good consideration sufficient to uphold a contract? 
When is it insufficient to uphold a contract? What is a valuable consid- 
eration? What may the benefit be? 

Page 15 — What is an invalid consideration? What is a failure of con- 
sideration? How does a failure of consideration affect a contract? 

Page 16. — What is "subject matter?" What may it be? What may 
it not be? State the three instances in which the subject-matter of a 
contract is illegal. 

Page 17. — To what extent may a contract restrain marriage and yet be 
legal? When is a contract illegal because in restraint of trade? To what 
extent may a contract lawfully restrain trade? 

Page 18. — What contracts are illegal because of immorality? What 
wagers are illegal by the common law? 

Page 19. — What contracts are illegal by reason of the statutes against 
betting and gambling? If both parties to a contract are guilty of fraud, 
what follows? If one party only is guilty what is the result? What is 
said about contracts designed to defraud third persons? 

Page 20. — What is the object of the statute of frauds? How does an 
oral contract facilitate fraud? What class of contracts must be in writing 
and signed by all parties? 



32 BUSINESS LAW. 

Page 21. — What is a sufficient writing? In case of a sale how is the 
debt contracted so that the promise to answer for it must be in writing? 

Page 22. — What promises in consideration of marriage must be in writing? 

Page 23, — In what form of money must debts be paid ? What constitutes 
legal tender? Under what circumstances may the giving of a note act as a 
payment? What is the duty of a creditor regarding payment? 

Page 24. — In what cases is payment presumed? 

Page 25. — If there are distinct debts owing a creditor at the time of a 
payment, how may he apply it? What is a tender of payment? 

Page 26. — What is the result if the debtor makes a valid tender of pay- 
ment? What are the formalities connected with a tender of payment? 
What may the debtor do if he is not certain as to the amount? What is 
said with reference to the tender of property? 

Page 27. — What is the policy of the law regarding outlawed debts? 
What is said regarding the Statute of Limitations? How is the time com- 
puted? How does the disability of the creditor affect it? 

Page 28. — Does the absence of the debtor affect it? What effect will a 
new promise have upon an outlawed debt? How must the new promise 
be made? What effect will part payment or the giving of a note have? 
What is the rule where there are several debtors? When do set-offs or 
counter-claims arise? 

Page 29. — What is a cause of action? When does a party to a contract 
have a cause of action? What is a breach of contract? What is an action 
in tort? What is a defense to an action? 

Page 30.— What is the compensation called which is allowed to the in- 
jured party? How'is it computed? What are the damages allowed for 
breach of a contract to sell or purchase goods? What is specific perform 
ance? Distinguish between liquidated and exemplary damages. 




NEGOTIABLE PAPEB. 



Its Origin. — Negotiable paper is said to have had its origin, 
like many of the world's conveniences for the transaction of 
mercantile business, with the Jew. Moreover, it is the off- 
spring of persecution. Early in the fourteenth century the 
Jews were banished from country to country. Negotiable paper 
formed a convenient means for carrying their property with 
them. They were largely engaged also in trading on the Medi- 
terranean coasts, and bills of exchange were resorted to for 
transferring property from one place or country to another. It 
has become a part of the commercial currency of the world. 
It facilitates the great operations of commerce. It increases the 
circulation and enlarges the nominal capital in trade. 

The Test of Negotiability. — Negotiability depends upon 
the presence in the writing of negotiable words. 

Negotiable "Words. — They are the words which render a bill 
of exchange, promissory note or check, negotiable. They im- 
part the negotiable quality. The usual words are "order" or 
" bearer." Without these words the instrument will not pos- 
sess the quality of negotiability. It may be assigned by one 
person to another, but the assignment of it transfers only the 
rights possessed by the person transferring it. If the person 
to whom it is originally given could not collect its face value, 
then no other person into whose hands it may come can do so. 
If an instrument has all the attributes of negotiability, how- 
ever, any person into whose hands it may come, in good faith, 
for a valuable consideration, before it is due, can enforce it to 
its fullest extent against every former owner as well as against 
the maker. 

The Result of Negotiability. — If the negotiable words are 
present, the writing, or instrument as it is usually called, passes 
from hand to hand by the simple act of indorsement and de- 
livery. It is given and received as a representative of value, 

33 



34 business law. 

whether a bill of exchange, a promissory note or a bank check. 
It is freely assignable from man to man, and its possession, for 
value, gives its owner a right of action. 

Payable Absolutely. — A negotiable instrument must con- 
sist of an obligation to pay absolutely a specified or ascertain- 
able sum of money. There must be no uncertainty as to the 
amount to be paid, and no contingency about its payment. 
The terms of payment must be absolute as to (1) amount, and 
(2) time. It cannot be made payable in property or in the cur- 
rency of any particular State or country. It cannot be payable 
in labor or services. If it is to be paid in any other way than 
by the transfer of money, or if any condition or agreement 
makes the time or amount uncertain, it is not negotiable. 

The Amount of the Negotiable Instrument. — The 
amount should be written in the body of the instrument. It 
should be written distinctly, fully and correctly. A mere mis- 
take in spelling a word, however, will not make it worthless. It 
is usual to insert the amount both in figures and in words, the 
figures in the upper or lower left-hand corner and the words in 
the body of the instrument. Such is the custom, but it is not 
a necessity. If there is a variance between the figures and the 
written words, the written words will control, unless it be 
proved that they are wrong. If a draft, note or check having 
the figures filled in, be properly signed and delivered, leaving 
the space for the written amount blank, the holder may write 
in the proper amount. 

The Date of the Negotiable Instrument. — This means 
both its date and its time of payment. Negotiable paper ought 
to be dated, but a date is not essential to its validity. If the 
place where it is made and the date are wanting the holder may 
prove them. It may be dated earlier or later than the day it 
is actually made without affecting its validity. When the date 
is used it is a material part of the instrument. Time is counted 
from the date. It is quite essential that a check be dated, for 
while it might be good as between the payee and the maker 
without being dated, yet the bank cannot safely pay it, and 
will ordinarily refuse to pay it. 

The Time of Payment. — We have seen that it must be defi- 



NEGOTIABLE PAPER. 35 

nitely fixed. If its payment is contingent upon the happening 
of some event or the performance of some act, it is not nego- 
tiable. The exact day of payment need not, however, be stated, 
or even known. It is sufficient, if the time is sure to come, 
although just when, is uncertain. It may be made payable at 
or within, a certain and fixed number of days after the death of 
a certain person. It is negotiable, because, while it is uncer- 
tain as to when its maturity will arrive, yet the death is sure to 
happen, and the time of payment is sure to come. It may be 
payable at sight or so many days after sight. It may be made 
payable on demand. The owner may then fix the time of pay- 
ment by presenting it and demanding payment. 

Other Necessary Conditions. — It goes without saying that 
a negotiable instrument must be in writing. That is, it must be 
either in writing, or partly in print and partly in writing. It 
must be properly signed by the maker. It is not essential that 
the name be written in full, and a person may make his mark 
in any chosen form so long as it is his intent to make it his sig- 
nature. When it is executed by one member of a firm or by an 
agent it should be so drawn or signed as to show that it is the 
paper of the firm or the principal. The payee must be stated 
with certainty unless it is made payable to bearer. If there is 
no designation of a payee, it is not negotiable. 

Non-Essential Parts. — It is customary for negotiable paper 
to have stated a place of payment. This is not essential. If 
the place of payment is stated, then the paper must be pre- 
sented there for payment and demand made. The drawer of a 
bill or the indorser of a bill or note cannot be charged unless 
the paper is presented at the place of payment at the proper 
time. The words "for value received" are usually inserted in 
bills and notes. The omission to insert them does not affect 
the validity of the instrument. Their presence is an admission 
that the maker has received value from the payee. When they 
are used in a bill of exchange they may mean that the drawer 
has received value from the payee or that the drawee has value 
in his hands from the drawer. 

Xon-Xegotiable Xotes and Drafts. — An instrument may 
be perfectly good and valid as between the maker and the payee. 



36 BUSINESS LAW. 

although not negotiable. It may not contain the negotiable 
words, but that is no reason why the maker should not pay it. 
The maker sometimes purposely refrains from inserting the ne- 
gotiable words if he prefers to have the payee hold it, for their 
absence renders its transfer difficult. 

The Assignment of Non-Negotiable Paper. — We have 
seen that there may be non-negotiable notes and drafts. For 
convenience they may be called non-negotiable paper; because 
they do not contain the negotiable words, or for some other 
reason they cannot be passed from hand to hand by simple in- 
dorsement and delivery, therefore they are not negotiable. But 
it does not follow that they cannot be assigned. They are as- 
signable by one holder to another just as any other form of 
contract. They are subject to sale, but unlike negotiable paper 
the purchaser takes them subject to all rights and equities ex- 
isting in favor of the maker. The purchaser can only protect 
himself by first inquiring of the maker or otherwise satisfying 
himself that there are no existing offsets or counterclaims to 
the paper. 

THE PARTIES TO NEGOTIABLE PAPER. 

The Maker. — This term is applied to the person who attaches 
his signature to the face of a promissory note. There may be 
a number of makers. A note may be made for the benefit of 
only one of them, and the others may be acting as sureties for 
the one who receives the benefit and proceeds of the note. They 
are all makers in the eye of the law, and in case of the non- 
payment of the note at maturity, it need not be protested as 
against any of them. No maker is entitled to notice of protest 
and non-payment. A person who signs his name as a maker 
but performs the act simply for the benefit of another maker, 
may protect himself by writing the word "surety" after his 
name. As a surety he is not liable until due process of law 
fails to collect the amount of the other parties. 

The Payee. — The payee is the person to whom a promissory 
note is made payable, or the person in whose favor the bill of 
exchange is drawn. 

The Indorser. — An indorser is a person who writes his name 



NEGOTIABLE PAPER. 37 

on the back of negotiable paper. The signature may be placed 
on the hack of a bill of exchange, on the back of a promissory 
note, or on the back of a check or draft, and in either case 
the writer is an indorser. The signature may be placed there for 
the accommodation of the maker, or for the previous endorser, 
or the person placing it there may himself receive the benefit 
of it. In either case he is entitled to notice of protest and non- 
payment in case the paper is not paid at maturity. 

The Holder. — A holder of negotiable paper is any person 
into whose hands the paper may come for value. He is the 
person legally in possession of it either by indorsement or de- 
livery, or both. If it is a note he is entitled to receive payment 
from the maker. If it is a bill of exchange he is entitled to 
receive payment from the drawer or acceptor. He must have 
paid some consideration for it. He must have become pos- 
sessed of it before its maturity, or otherwise his right to pay- 
ment is subject to any offsets or counterclaims existing in favor 
of the maker. 

The Drawer and Drawee. — ^l drawer is a person who 
makes a bill of exchange, and a drawee is the person to whom 
it is addressed, and who is requested to pay the amount of 
money therein mentioned. When the bill is presented to the 
drawee for payment, if he accepts it he then becomes the ac- 
ceptor. By acceptance is meant the assent which he gives 
either expressly or by implication to the terms of the bill. It 
is a declaration of his willingness to pay the amount which he 
is requested to pay. The usual manner of acceptance is for the 
drawee to write the word "accepted" across the face of the 
bill, followed by the date and his signature. At common law 
a verbal acceptance is sufficient, but in some of the States stat- 
utes have been enacted to the effect that an acceptance must 
be in writing. 

PROMISSORY NOTES. 

Definition. — A note is simply a written promise to pay 
money at a specified future time. The promise is made by the 
person signing it, called the maker. The promise is to pay the 
money to the person named in the writing, called the payee, or 



38 BUSINESS LAW. 

to his order, or to bearer. It is called a promissory note be- 
cause it is a "promise to pay/' and those words occur in it. 
In ordinary business transactions it is called simply a note. It 
is the most ordinary form of negotiable paper, although bills of 
exchange were probably first used in commercial transactions. 
The Form of a Note. — No precise form or wording is nec- 
essary providing the essential requirements or conditions are 
observed. We have already seen what these are. An ordinary 
form is this : 

PROMISSORY NOTE. 



^q. Geneva, N. T., June 1, 18.91. 

Ten days after date, I promise to pay to the order 
of W. B. Wilson, Eight Hundred Dollars, at the First Na- 
tional Bank, Geneva, N. Y. Value received, with use. 

Robert D. Brown. 



This note is payable "to the order of" the payee, Wilson. 
It might read, "I promise to pay to W. B. Wilson, or bearer." 
It might also be payable "to bearer" or "to my own order." 
If any of these forms are used the note is negotiable. If it 
should read simply " I promise to pay to W. B. Wilson, " the 
words "bearer" or " order" being wholly omitted, it would be 
a non-negotiable note. Being non-negotiable, Wilson might 
sell it, but the purchaser would take it subject to all the rights 
which existed in favor of Brown, the maker. For instance, if 
Brown gives the note to Wilson in payment for "Bohemian 
oats " or for a worthless patent right, or in any other transac- 
tion in which he is swindled, then he has a claim against 
Wilson for damages. If the negotiable words are not in the 
note it is non-negotiable, and Brown may offset his claim for 
damages against any one into whose hands the note may come. 
If the negotiable words are present and the payee, Wilson, sells 
the note, before it is due, to a third person who buys it in good 
faith and is ignorant of the swindle or fraud practiced upon 
Brown, then Brown must pay it in full. 



NEGOTIABLE PAPER. 39 

"With Use." — It will be observed that these words are in 
the form given. Thej T mean that the note draws interest. 
Sometimes the words "with interest" are used. If the payee 
or holder intends to procure the note to be discounted at a bank, 
words denoting that the note draws interest are frequently 
omitted. The interest which will accrue on it, is computed, 
and the owner receives the balance. The interest deducted is 
the discount charged by the bank and forms its profit by the 
transaction. A note does not draw interest, unless the words 
"with interest'' or, "with use" form a part of the writing. 

The Maturity of Notes. — The day when a note is payable 
is its day of maturity. It is said to fall due or mature that 
day. In the form given, the maker, Brown, promises abso- 
lutely to ])ay the amount ten days after date, and the date is 
June 1st. The note is not due, and Brown is not bound to 
pay it, until June 14th, because the maker has three days after 
the specified day of payment within which to pay it. They are 
the three days of grace which, by immemorial custom, are 
allowed the makers of notes and bills in all cases where they 
are drawn payable at a specified time. The note in question 
might read "June 11th after date" or, "ten days after de- 
mand, " but in either case the time of payment is specified and 
the maker has three days of grace. He has the whole of the 
third day. The maker Brown, as we have seen, has until June 
14th within which to pay his note. He cannot be sued for it 
until the loth, or the day following the last day of grace. A 
note payable on demand has no days of grace. 

Presentment for Payment is the demand of payment at 
maturity. If a note is not drawn payable at any particular 
place, the maker is bound to look up the holder and pay it. 
If the place of payment is stated in. the body of the note, the 
holder would be obliged to present it then, or otherwise de- 
mand payment, before he could sue the maker. A failure to 
present the note at maturity, or demand payment, does not 
release the maker. It is his duty to have sufficient funds at 
the place to satisfy the note. If he does that, he will be dis- 
charged from the liability to pay interest and qosts accruing 
thereafter. Presentment of notes, and demand for payment, 



40 



BUSINESS LAW. 



is strictly necessary in order to hold an indorser liable. Under 
the discussion of Bills of Exchange, which follows, the rules 
of presentment are given. 

BILLS OF EXCHANGE. 

Their Origin and Use. — They originated with the early 
traders along the Mediterranean coasts. They were used then 
as now, to facilitate trade. By their use debtors residing at a 
distance from creditors are enabled to cancel debts, without 
an actual shipment of the money. The drawing of a bill of 
exchange or draft, is always in effect, a transaction between 
debtor and creditor. It is a request by the creditor to the 
debtor, to pay a third person, the sum of money specified. 

Foreign and Inland. Bills. — If. the request is made to a 
person residing in a different State or country, the term for- 
eign bill of exchange is applied to it. If the parties are resi- 
dents of the same State or country, it is an inland or domestic 
bill and is commonly called a draft. The term, foreign draft, 
is frequently applied to a foreign bill. 

The Form of a Bill. — The necessary requirements, which 
we have seen pertain to all kinds of commercial paper, must 
be present in the bill. Otherwise no particular form of words 
need be used. An ordinary form is as follows : 

INLAND BIIX OF EXCHANGE OR DRAFT. 



$1,000 T %\. 


Pasadena, 


Cal., June 


1, 1891. 




At 


sixty days 7 


sight 


pay to J. J. 


Kempe, 


or 


order, One Thousand Dollars, 


value received, and 


charge 


to 


my account. 






Geo. P 


, Davis. 




To Sam. D. Lee, 












Savannah, 


Ga. 











Technically this would be a foreign bill, as it is drawn by a 
resident of one State upon a resident of another State, but that 
term is now commonly applied only to bills in which the drawer 



NEGOTIABLE PAPER. 41 

and drawee are residents of different countries, and the usual 
form for such a bill is as follows: 

FOREIGN BII/L OF EXCHANGE. 






1. Exchange for 

£10,000. New York, 


June 1, 1801. 


Sixty days after sight of this first of ex- 
change ( second and third unpaid), pay to the order of R. B. 
Evans £ Co., Ten Thousand Pounds Sterling, value received, 


and charge to my account. 




W. 


H. Goodman. 


To Howard Case, 








Liverpool, Eng. 









Foreign bills of exchange are drawn in sets of three, as 
shown by the words "second and third unpaid" in the above 
form. They may be forwarded by different routes, and the one 
first arriving be paid, or the second and third may be retained, 
until it is known whether the first miscarries. 

The Maturity of a Bill. — The bills given in the foregoing 
forms are payable sixty days after sight. The drawees, Lee 
and Case, have sixty days after seeing them, or after present- 
ment, within which to pay. If the bills were to read "at 
sight," instead of "at sixty days sight," or "sixty days after 
sight," they w T ould be payable immediately on presentment. 
They would then be " sight drafts. " They might also be drawn 
payable on demand, or a certain number of days after date. 

Days of grace are allowed for the payment of bills in the 
same cases as with notes, unless the statute law of the place 
where payable, enacts to the contrary. Many States have 
enacted statutes to the effect that bills drawn "at sight" shall 
have no days of grace, and also as to bills drawn upon a bank. 
A bill drawn payable "on demand" is like a note so drawn, in 
that it has no days of grace. 

Presentment for Acceptance. — It is the duty of the 
payee or holder of a bill to i^resent it for acceptance, (1) to the 
right person, (2) at the right time and place, (3) in a proper 
manner. 



42 BUSINESS LAW. 

(1) It ought to be presented to the drawee in person or his 
duly authorized agent. If it is drawn upon two persons who are 
not partners it should be presented to both of them. If they 
are partners presentation to one is sufficient. It should be 
presented by the rightful owner or his agent. 

(2) If a bill is drawn payable " at sight/' or a specified num- 
ber of days " after sight/' or " after demand/' it must be pre- 
sented within a reasonable time.. What is a reasonable time 
depends upon the particular circumstance of each case. If 
the bill has to go a long distance, or the holder is delayed by 
flood or a railroad wreck, the time would be greater than if the 
drawee was easy of access and no particular circumstance pre- 
vented the presentment. A bill drawn payable a certain num- 
ber of days after date or on a specified day need not be pre- 
sented prior to the time. An early presentment is best, 
however, for the drawee may accept it and thus become liable 
for it, although he may not intend to pay it until maturity. 
The presentment should be made during business hours, or at 
least between morning and bedtime. If addressed to any par- 
ticular building or street number, it should be presented there, 
otherwise at the residence of the drawee. If he has moved to 
another place, in the same State, diligent search should be 
made for him. If he has left the State, presentment at his last 
place of residence is sufficient. 

(3) The drawee should have a reasonable opportunity to ex- 
amine the bill. He is also entitled to an opportunity to exam- 
ine the state of his accounts with the drawer. If necessary 
for this purpose, and he demands it, the bill should be left with 
him for twenty-four hours. In some States, it is made a crime 
by statute if he destroys the bill or fails to return it. 

Acceptance. — When the draft shown in the first form is 
presented to the drawee, Lee, if he is willing to pay it, he sig- 
nifies such willingness either orally or in writing. In com- 
mercial language he "accepts" it. He is therefore liable to 
the holder upon his "acceptance." According to the usual 
course of business, he would signify such willingness by writing 
the word "accepted" across the face and adding his signature 
and the date. By the common law he could orally promise to 



NEGOTIABLE PAPER. 43 

pay it and, his acceptance was just as valid. It is best to have 
the acceptance in writing for greater certainty, and in many 
States it is provided by statute that an acceptance must be in 
writing, in order to be valid, and the holder may require ac- 
ceptance in writing. 

Conditional Acceptance. — The acceptance may be condi- 
tional or absolute. The bill itself, however, must be an absolute 
direction to pay without contingency or condition. If the 
drawee accepts it, to be paid when there are funds of the drawer 
in his hands, it is a conditional acceptance — conditional upon 
the existence of the necessary funds. The holder is not bound 
to receive a conditional acceptance. If he receives it, he must 
abide by its terms. By receiving it, he discharges the drawer 
from further liability. 

Absolute Acceptance. — If the drawee accepts a bill, un- 
conditionally, he becomes the acceptor, and is bound to pay the 
bill according to its terms. Thereafter he is the principal 
debtor. The drawer and indorser are looked upon as his sure- 
ties. It is just as though he made his promissory note for the 
amount. 

Non- Acceptance is the refusal of the drawee to accept a 
bill. He is not bound to accept it even though he has funds 
in his hands w T ith which to meet it, nor is he bound to accept 
it until maturity. If he declines to accept it, whether pre- 
sented to him at or before maturity, there are certain steps 
which the holder must immediately take. He must give the 
drawer and indorsers due notice that the bill is "dishonored" 
— that the drawee refuses to accept it. It is not enough to 
notify the indorsers, as in case of a promissory note, but the 
drawer is also entitled to notice. He is not entitled to notice 
if he knew at the time he drew the bill, that he had no funds 
in the hands of the drawee, and that there would be no funds 
with which to pay it. It would be easy for him to say, how- 
ever, that he supposed that he had the funds and therefore the 
safe course is to notify him, in all cases, if it is desired to hold 
him liable. 

Protest and Notice. — If a foreign bill is dishonored, it 
should be protested by a notary public, and notice of protest 



44 BUSINESS LAW. 

sent to the parties, together with the notice that it was dis- 
honored. An inland bill need not be protested. It is sufficient 
if the drawer and indorsers are given notice of its dishonor. 
The notice need not be in writing, and no particular form of 
words is required, so long as it conveys to them the information 
that acceptance of the bill has been refused. 

If not given orally or delivered personally, the notice may be 
deposited in the post office at the place where the bill was pay- 
able, directed to the post office address of the parties for whom 
it is intended. 

When a protest and notice of protest is required, as in case 
of the non-acceptance of a foreign bill, more formality is re- 
quired. Protest is a formal declaration in writing by a notary 
public, that he duly demanded payment and that payment was 
refused. The protest must identify the bill by including a copy 
of it or otherwise referring to it. Suppose the draft given in 
the first form, was dishonored, the notary would mail to the 
maker, Davis, at Pasadena, a notice similar to this • 

NOTICE OF PROTEST. 

Savannah, Ga., Aug. S, 1891. 
Sir : 

Take notice, that a bill drawn by yon, upon Samuel D. 
Lee, for $1000, dated June 1st, 1891, payable sixty days after 
sight, at Savannah, Ga. , was this day protested for non-pay- 
ment, and that the holders look to you for payment thereof, pay- 
ment having been demanded and refused. 

Yours respectfully, 

J. B. BOSTWICK, 

Notary Public. 

To Geo. P. Davis: 
It is desirable that you notify your prior indorser, if any. 

Where to Send the Notice. — If there were an indorser to 
be charged, the words "and indorsed by you," would be in- 
serted after the place of payment, and a copy of the notice 
would be mailed also to the indorser. Sometimes a drawer 



NEGOTIABLE PAPER. 45 

or indorser may add to his signature, his residence or place 
of business. The notice must be directed accordingly, unless 
lie has moved. If the residence or place of business is not 
known, it is the holder's duty to make careful and diligent in- 
quiry to ascertain it. If he does so and acts upon the informa- 
tion he receives, even though misled, he performs his duty. 
Some States have enacted statutes regulating the giving of the 
notice and these should be consulted. 

When to Send the Xotice. — Due diligence is required. 
Unless a statute prescribes the time within which the notice 
must be given, it is sufficient if the holder uses reasonable dili- 
gence, considering all the circumstances. As in case of pre- 
sentment, he may have to make inquiries concerning the 
residence of the person to be served with notice. The preva- 
lence of malignant disease ; the stoppage of the ordinary channels 
of communication by fire, flood, or inevitable accident; the 
sudden death of the holder or of his agent — all such things will 
be taken into account if the question is whether he has used 
due diligence. Under ordinary circumstances, the notice 
should be mailed, or delivered on the next business day fol- 
lowing the day of refusal of payment. Notice of non-payment 
need not be given to indorsers of non-negotiable paper, unless 
required by statute. It is frequently customary for drawers 
and indorsers to waive protest and notice of non-payment by 
written waiver on the back of the paper. This is done by writ- 
ing the signature after these words: "For value received I 
hereby waive demand, protest and notice of non-payment." 

CHECKS. 

Checks are Bills of Exchange, drawn on a bank or banker. 
They never specify a time of payment. They are, therefore, 
payable immediately, and days of grace are not allowed. A 
drawer w r ho has no funds to his credit in the bank, sometimes 
dates his checks ahead. A post dated check has no validity 
until the day of its date arrives, and before that time the 
drawer expects to have funds on deposit to meet it. An ordi- 
nary form of a check is this : 



46 BUSINESS LAW. 

CHECK. 



No. 852. Rochester, N. Y., June 1, 1891. 

MERCHANTS BANK OF ROCHESTER. 

Pay to Stewart Terry, or order, Five Hundred Dollars, 
$500 T yL. 

Howard Jerome. 



The Negotiable Words. — The above check might be drawn 
"to the order of Stewart Terry," -or it might be drawn "to 
Stewart Terry or bearer. " In either case it would be negotiable. 
If it is payable to Terry's order, the bank has no right to pay 
it to any one else, unless it bears his indorsement. Hence, if 
it is lost or stolen and his signature is forged, and the amount 
is paid by the bank to the forger, the bank is the loser. Neither 
Terry nor Jerome suffer by the forgery. But if a check is 
drawn payable to bearer, the bank can safely pay it to any 
person presenting it, although he may not be the rightful 
owner. 

Liability of the Parties. — The drawer of a check is liable 
to pay it if the bank does not, providing it has been duly pre- 
sented for payment. The bank is bound to pay it, if the drawer 
has funds applicable. No one but the drawer, however, can 
enforce this obligation resting on the bank. In some States, 
statutes have been enacted making it a crime for a person to 
draw and deliver a check, knowing that he has no funds at the 
bank with which to pay it. This would not apply to a post 
dated check and the statutes are frequently evaded by post 
dating. In the absence of a statute it is a fraud to draw a 
check knowing there are no funds to meet it. 

Presentation. — It is the duty of the holder of a check to 
present it for payment, within a reasonable time. The rules 
given for the presentation of a bill of exchange for acceptance, 
which have been discussed in the previous pages, apply sub- 
stantially to the presentation of checks for payment. Failure 
to present a check within a reasonable time may discharge the 



NEGOTIABLE PAPER. 47 

indorsers and drawer. The bank may have funds of the drawer 
to pay a check if it is seasonably presented. But suppose it is 
held for an unreasonable length of time, and before it is pre- 
sented the bank fails ; the loss will not fall upon the drawer, 
for he had funds on deposit to meet it when it was given, and 
he had every reason to suppose that the holder would perform 
his duty by presenting it. When payment of a check is refused 
notice of demand and non-payment must be given the drawer 
and indorsers, as in the case of bills. 

Certification of Checks. — It was said in the paragraph 
next to the last that no one but the drawer could enforce the 
bank's obligation to pay a check if there were funds to meet it. 
The holder has no rights as against the bank until the bank 
has accepted the check. A check is accepted by certifying it. 
Certification is to a check what acceptance is to a bill. The 
cashier, teller, or other proper officer writes the word "good" 
or "certified " across the face of the check, together with the 
date and his signature. By that act the bank itself becomes 
responsible for the amount. It makes an agreement with the 
holder and with any one to whom he may transfer the check, 
that the drawer has the necessary funds on deposit, and that it 
will retain in its hands a sufficient amount to pay the check 
whenever presented. Thereafter the holder can retain the 
check as long as he pleases, before presenting it. He runs no 
risk, excepting that of the bank's insolvency. 

Hints About the Use of Checks. — Present them for pay- 
ment or have them certified as soon as possible after receiving 
them. 

Draw them "to the order of " unless there is some good 
X'eason for drawing them payable "to bearer." For, if they are 
payable to the order of the payee, they must bear his indorse- 
ment before being paid, and they thus become a voucher or re- 
ceipt for the payment of the debt. 

If an error is discovered after a check has been delivered, or, 
if for any other reason its recall is desired, " stop payment," by 
directing the bank not to pay it. This can be done at any time 
before the bank has paid or accepted it. 



48 BUSINESS LAW. 

THE TRANSFER OF NEGOTIABLE PAPER. 

By Assignment. — We have seen that non-negotiable paper 
may he passed from hand to hand by assignment. The owner 
of such paper may make an assignment of it to another and 
that other, or the assignee as he would be called, may collect 
it. But negotiable paper also, may be transferred by assign- 
ment, without indorsement. The result of a transfer in this 
way, is to cause it to be subject to any defenses the maker or 
drawer may have. It would thus lose its chief virtue as nego- 
tiable paper. If the payee of the note given as a form wished 
to assign it, he could annex to the note a writing like this: 
« For value received, I hereby transfer and assign the annexed 
note to John Jones. W. B. Wilson." 

Dated July 1, 1891. 

By Simple Delivery. — A bill or note payable to a person 
named in it, or to bearer, may be transferred by a mere delivery 
of it. No writing, by way of assignment or indorsement is 
needed. But if it is payable to a person named in it or his 
order, he must indorse it to render it negotiable. 

By Indorsement " Without Recourse." — This is resorted 
to when the holder of paper wishes to transfer it without in- 
curring the liability of an indorser, and at the same time pre- 
serve its negotiable character. He indorses it, that is writes 
his name on the back, and above his signature he writes the 
words "without recourse." His connection with the paper 
ends on delivery of it. It is immaterial to him whether it is 
paid or dishonored. 

By Indorsement. — This is the usual and ordinary method 
of transferring title to negotiable paper. The previous meth- 
ods are not employed except there be some special reason for 
their use. By this method is meant that manner of transfer- 
ring paper whereby the person transferring it assumes a liability 
to pay it. If he is the first person to indorse it, then he is 
liable to pay it if the maker does not. If others have indorsed 
it before him, he is liable to pay it if such other persons, who 
are called his prior indorsers, or the maker do not pay it. 

Who May Transfer Paper. — Only the person having title 
to it can transfer it. It may be the payee, or it may be an 



NEGOTIABLE PAPER. 49 

indorser or assignee — that is some one to whom it has been 
transferred by the payee. The executor or administrator of a 
deceased holder of paper, has title sufficient to transfer it. An 
executor or administrator, however, should indorse the paper 
"without recourse " in order to escape personal liability. 

THE INDORSEMENT OF NEGOTIABLE PAPER. 

What is Indorsement. — In its simplest sense, it is the act 
of the holder, writing his signature on the back. He " backs" 
it. The term is also used to indicate the signature itself, as well 
as the contract which the indorser makes by placing it there. 

With Whom the Contract is Made. — It is made with 
every one who may afterwards own the paper. The indorser 
assumes a liability which can be enforced by any future holder. 

The Liahility Assumed. — It is a liability to pay it, provided 
it is not paid at maturity. This is called the contract of in- 
dorsement, and it is wdiat the indorser agrees to do by "back- 
ing " the paper. The person who indorses a note agrees that 
if the maker or prior indorsers do not pay it, he will. The 
indorser of a bill of exchange agrees, in addition, that, if the 
drawee refuses to accept it, he will pay it. 

Conditions of the Liability. — The above is the naked 
agreement of the indorser. He agrees to it, however, upon 
certain conditions. Certain steps have to be taken by the final 
holder of the paper in order to fasten the liability upon the in- 
dorser. The conditions are (1) that the paper will be presented 
for payment or acceptance at the proper time and place ; (2) 
that, if it is dishonored, the indorser shall receive due notice ; 
(3) in a necessary case, that the paper shall be duly protested 
for non-payment. 

The Time and Place of Presentation. — Under the dis- 
cussion of promissory notes and bills of exchange, the rules 
relating to presentation for acceptance and payment have been 
stated in detail, and also the rules relating to protest and notice 
of non-acceptance and non-payment. The same rules apply 
substantially to the presentation of all kinds of negotiable 
paper for payment, in order to charge an indorser. Pay- 
ment must be demanded when due, at the proper place of 



50 BUSINESS LAW. 

■ 

payment, and the indorser must have due notice that payment 
was refused. If these conditions are not performed, the 
indorser is released from liability. The indorsees liability is 
regulated by statute, and in one or Wo States no demand of 
payment or notice is necessary. In most of the States the rules 
given above apply. 

Forms of Indorsement. — Besides the indorsement "with- 
out recourse " which has been mentioned, there are other forms 
of indorsement. If Wilson, who is named as payee in the form 
of a promissory note on page 38, wishes to transfer the note by 
indorsement, he may simply write his name on the back with- 
out other words. That would be an indorsement in blank. If 
he wishes he may write " Pay to the order of John Jones, W. B. 
Wilson." That would be an indorsement in full. If he writes 
before his signature, " Pay to John Jones only," it is a restrict- 
ive indorsement, as payment can only be enforced by Jones, and 
henceforth the note is not negotiable. If he wishes to give 
power to collect the note without transferring title to it, he 
would write, "Pay to John Jones for collection" before his 
signature. In case of indorsement in blank, if Jones became 
the next holder, he may if he chooses write the words, ''Pay 
to the order of John Jones " above the signature of Wilson. ' 
In that case the note cannot be safely paid until Jones has 
indorsed it. 

A BONA FIDE HOLDER. 

Application of the Term. — It is applied most frequently 
to the holder of a promissory note, who has become possessed 
of it after it has been made and delivered. It may, however, be 
applied to one holding any form of negotiable paper under the 
same conditions. The bona fide holder is not one of the orig- 
inal parties to the paper. He knows nothing about the circum- 
stances attending its making and delivery. If the maker has 
any particular offsets or counterclaims against the payee, the 
bona fide holder knows nothing about them. If he does, then 
he is not a bona fide holder. 

Conditions of Bona Fide Holding. — To constitute a 
person a bona fide holder, the paper must be negotiable on its 






NEGOTIABLE PAPER. 51 

face and must be transferred to him (1) in good faith, (2) 
before maturity, (3) for value. In other words the bona fide 
holder of a note must have bought it before maturity, for a 
valuable consideration, supposing it to be valid negotiable paper, 
and having no knowledge or suspicion that the maker has any 
defense to it. 

The Result of a Bona Fide Holding. — The bona fide 
holder of negotiable paper can collect it although the party 
from whom he takes it had no title to it or for any other reason 
could not enforce it. This is one of the chief characteristics 
of negotiability, In buying any other kind of personal prop- 
erty it is the duty of the purchaser to beware — to examine its 
nature and to see how the seller came by it. But if a man 
offers to sell you a promissory note which apj)ears to be proper 
on its face, and there is nothing in the seller's actions to excite 
your suspicions, you are not bound to hunt up the maker and 
ask him how he came to give the note. If his signature was 
procured by fraud, that fact will not relieve him from paying it. 

" Bohemian Oats. " — The importance of the rule of bona 
fide holding makes it worth an illustration. The illustration 
selected is tpyical of a large class of transactions in which men 
are induced to give their promissory notes by deceit and fraud- 
ulent representations. There are cases in the books where men 
who have been sued upon notes which they have made, have 
tried to defend the suits upon such grounds as these : That 
the notes were given for the purchase price of what was repre- 
sented to them as a new and marvelously productive kind of 
oats ; that they were told they need not pay the notes if every- 
thing was not satisfactory; that, if the oats were delivered at all, 
they were a very ordinary kind of oats ; that they supposed 
they were simply putting their signatures to a trial order for 
some of the oats though in fact the order proves to be a com- 
plete promissory note. Of course, the maker feels that he 
ought not to pay a note given under such circumstances. If 
it remained in the hands of the person to whom he gave it, he 
would not be obliged to pay it. But it always turns up in the 
hands of a man who claims to be a bona fide holder. He claims 
he bought it in good faith, before maturity, in the usual course 



52 BUSINESS LAW. 

of business. Nine times out of ten the maker has to pay it. 
The alleged bona fide holder may be a confederate of the payee 
and just as guilty, but the business is so conducted that the 
maker cannot prove the conspiracy. 

Lost and Stolen Paper may even be good in the hands of 
a bona fide holder. The rightful owner of paper which has 
been lost or stolen, must give immediate notice of the loss, to 
all the parties. He should publish the notice as widely as pos- 
sible. This applies to all paper drawn payable to bearer or to 
order and indorsed in blank. If the paper requires the owner's 
indorsement to render it negotiable, and he has not indorsed it 
prior to its being lost or stolen he cannot suffer any loss, even 
though his indorsement is so cleverly forged as to escape detec- 
tion. According to statute in most of the States the lawful 
owner of lost or stolen paper may collect it, even though he 
cannot produce and surrender it. He is usually obliged, how- 
ever to execute a bond to save the maker from loss if the paper 
should afterward prove to be in the hands of another. 

Forged Paper. — From what is said in the last paragraph 
and previously, it is readily seen that forged paper has no valid- 
ity even in the hands of a bona fide holder. Whoever purchases 
it or pays it suffers the loss. 

Accommodation Paper. — Eeferring to the form of a 
promissory note on page 38, if Brown, the maker, has con- 
sented to lend his credit to the payee, Wilson, and makes the 
note without any consideration, so that Wilson may sell the 
note and procure the proceeds by the accommodation, it is ac- 
commodation paper, and Wilson is an accommodation holder. 
He has no right to use the paper for any other purpose or in any 
other way than as agreed upon with the maker. This obliga- 
tion, however, is only enforceable as between the maker and 
one who is not a bona fide holder. If the paper passes into the 
hands of a bona fide holder, he can collect it although it has 
been "diverted" from its intended use. When one person 
indorses paper for the accommodation of another, in order to 
give it credit, he is said to be an accommodation indorser. 

Guaranty of Paper. — Guaranty of paper differs from in- 
dorsement in that the person who guarantees paper, called the 



NEGOTIABLE PAPER. 53 

guarantor, is not a party to the paper. The indorser is always 
a party to the paper. Moreover, the indorsees contract is 
negotiable, that is, his liability passes from hand to hand with 
the note. The contract of the guarantor may be assigned, but 
is not negotiable. The guaranty of paper is written on the 
back in words like these : " For value received I hereby guar- 
antee the payment of the within note." Under that form, if 
the paper is not paid when due the guarantor may be sued 
immediately with the maker. If the guarantee is of " the collec- 
tion/' instead of the payment, the guarantor cannot be sued 
until judgment has been rendered against the maker, and the 
legal process fails to collect the judgment. 



QUESTIONS. 

Page 33. — State the origin and use of negotiable paper. What are the 
negotiable words? What is the result if they are inserted? What is the 
result of negotiability? 

Page 34. — What is said in regard to uncertainty as to the amount of 
the paper? How is it customary to state the amount? What is the neces- 
sity of negotiable paper being dated ? To what extent may the time of 
payment be fixed ? 

Page 35 — What are some of the non-essential parts of negotiable pa- 
per? How is non-negotiable paper transferred? What other necessary 
conditions are mentioned ? 

Page 36. — Who is the maker of a note? Who is the payee of negotia- 
ble paper? What effect will the word ''surety " have, after the maker's 
name ? 

Page 37. — Who is called a holder of negotiable paper ? Distinguish 
between the drawer and the drawee in a bill of exchange. What is a 
promissory note? 

Page 38 — What is said regarding the form of words of a note? What 
other words misrht be used in the form given ? 

Page 39. — When does a note draw interest? What is meant by the ma- 
turity of a note? What are days of grace? What must the holder of a 
note do regarding demand of payment? What is the result of a failure 
to demand payment ? 

Page 40. — Distinguish between foreign and inland bills of exchange . 
What are the necessary requirements of a bill ? 

Page 41 — When does a bill of exchange mature ? What is the rule 
regarding the allowance of days of grace for bills of exchange? What 
is the duty of the holder of a bill regarding presentment for acceptance ? 



54 BUSINESS LAW. 

Page 42. — What is the acceptance of a bill and how is it done? In 
what cases must a bill be presented within a reasonable time ? 

Page 43. — Distinguish between conditional and absolute acceptance. 
What is non-acceptance ? What must be done in case of non- acceptance ? 
When is protest and notice of dishonor of a bill necessary? 

Page 44.— How is notice given? In what form must the notice be ? 

Page 45. — When should it be sent? What are checks? What is waiver 
of protest and notice ? 

Page 46. — Who are the parties to a check and what is their respective 
liability? What is the duty of a holder of a check with regard to presen- 
tation ? How may a check be drawn payable ? 

Page 47. — What is the certification of a check? What is the contract 
of certification ? 

Page 48. — When may paper be transferred by assignment? When by 
simple delivery? What is the object of indorsement without recourse? 

Page 49. — What is indorsement? What is the liability incurred? What 
is said regarding the time and place of presentation in order to charge 
the endorser? 

Page 50. — What are the circumstances under which a person may be a 
bona fide holder? What other forms of indorsement are mentioned ? 

Page 51.— What is the result of a bona fide holding ? 

Page 52 — What is the rule regarding the validity of lost and stolen 
paper? Of forged paper? What is accommodation paper? What is the 
guaranty of a paper and how is it distinguished from indorsement ? 



SALES OF PEESOXAL PEOPEETY. 



Personal Property includes every article subject to owner- 
ship which may be detached by the owner and transferred by 
him from place to place. It is movable property, in contradis- 
tinction to real property, which is immovable. 

A Sale is a transfer of the ownership for a price in money. 
It is not necessarily a transfer of the thing itself, although the 
delivery of possession usually follows a sale. The term sale is 
used in law only with reference to personal property. The 
word conveyance is most frequently applied to the transfer of 
real estate. Moreover, it is a transfer for money. If the pur- 
chase price is paid in property, the contract is one of barter or 
exchange. 

The Requisites of the Contract are the same as in any 
other contract. For instance, there must be competent parties; 
the same mutual assent of the parties ; there must be a consid- 
eration, which is called the price ; there must be the subject 
matter, which is the thing sold. Moreover, we have seen that 
the statute of frauds, relates to sales of personal property, and 
therefore conformity to the statute, is another requisite in this 
class of contracts. 

The Parties. — They are the buyer and the seller; the seller 
is frequently called the vendor and the buyer the vendee. They 
must be competent to make a contract, excepting, as we have 
seen, in cases where infants or lunatics may make a contract 
for necessaries. The seller must own the property which he 
seeks to sell. If he has no good title to it himself, no one who 
buys it can get a good title to it. We have seen that the one 
exception to this rule is in the sale of negotiable paper to a 
bona fide holder, where the buyer can get good title although 
the seller did not have it. 

Mutual Assent and Price. — The principles of mutual 
assent, as stated under that head in the discussion of contracts, 

55 



56 BUSINESS LAW. 

apply in every respect to the contract of sale. The price is 
called the consideration in other kinds of contracts. It must 
be either money paid or promised to be paid. If the amount 
to be paid by the buyer is expressly agreed upon there is said 
to be an express price. If no price is fixed it is implied. The 
law will imply that the seller is to pay the reasonable market 
value for the article he purchases. He is bound to pay the 
reasonable market value although it may be greater than the 
price he could have agreed upon with the seller. 

The Subject Matter of the Sale. — It is the thing sold. It 
must either actually exist or have a possible existence, some- 
times called a potential existence. It may not in fact exist, 
but if there is a possibility of its coming into existence, it may 
be sold. We have seen under the discussion of failure of con- 
sideration (page 15), that if the thing intended to be sold has 
perished or been destroyed there would not be a valid contract, 
because of failure of consideration. The illustration given ap- 
plies to a sale. It is not essential to the contract of sale that 
the thing sold should have a bodily existence and be capable of 
manual delivery. It is sufficient if it has an actual value, like 
the good will of a trade. 

Dealings which Amount to a Sale. — Any words indicating 
a bargain, whereby the owner of the thing signifies his willing- 
ness to sell it, and /the purchaser signifies his willingness to buy 
it for a price, will constitute a sale. If the subject matter has 
not an existence sufficient to make it possible of sale, as we 
have seen in the last paragraph, the bargain becomes an execu- 
tory contract to sell. If the thing has perished, as in the illus- 
tration, and the seller is unable to carry out his contract the 
buyer can recover whatever damages he may have suffered. 

Dealings which Do Not Amount to a Sale. — There is no 
sale in case of a mutual mistake as to the identity of the sub- 
ject matter. If the seller has one thing in view which he sup- 
poses he is selling, and the buyer has JR. view an entirely 
different thing which he supposes he is buying, there is no sale 
of either. There is a form of transaction which is called a sale, 
m which the owner of the property delivers it to another, upon 
the understanding and agreement that the title is not to pass 



SALES OF PERSONAL PROPERTY. 57 

until the purchase price has been fully paid. Under such 
circumstances there will be no valid sale until the price is paid 
as agreed upon, and thereupon the title will pass. This con- 
tract is frequently resorted to by dealers selling on the " install- 
ment plan." 

When the Contract of Sale Must be in Writing. — We 
have seen that, by the statute of frauds, every contract for the 
sale of personal property for the price of $50 or more shall be 
void, unless 

1. — A note or memorandum of such contract be made in 
writing and be subscribed by the parties to be charged there- 
by ; or, 

2. — Unless the buyer shall accept and receive part of the 
goods ; or, 

3. — Unless the buyer shall, at the time, pay some part of the 
purchase money. 

There is a slight variation in the statutes of the various 
States as to the amount of the purchase which will cause the 
case to be affected by the statute. In most cases it is fifty dol- 
lars. In New Hampshire it is thirty-three dollars and thirty- 
three cents ; in Maine, thirty dollars; and in Vermont, forty 
dollars. 

What is a Sufficient Writing. — It may be a "note or 
memorandum"; it may be an ordinary business letter sent and 
answered ; it may be a simple memorandum, like this : 

Southold, N". Y., June 1st, 1891. 
Bought of Bradley S. Wiggins this day his span of black 
horses for $150.00. 

Seth L. Tuthill. 
Bradley S. Wiggiks. 

A Bill of Sale. — It is frequent in cases where the transac- 
tion involves the sale of valuable property, or if the purchaser 
desires some evidence of his title, for the seller to execute a bill 
of sale. No particular form of words is necessary. It is suf- 
ficient if it describes the property, states the price and contains 
proper words denoting a transfer. The following is an ordi- 
nary form : 



58 BUSINESS LAW. 



BILL OF SALE. 



$fa0W aU Pew Inj ®hW Extmt$ : 7%<tf J, Joseph H. Oil- 
mors, of Yonkers, JV. Y., of the first party for and in consider* 
ation of the sum of $1200.00, lawful money of the United States, 
to me in hand paid, at or "before the ensealing and delivery of 
these presents, by Henry F. Burton of the same place, of the sec- 
ond part, a receipt whereof is hereby acknowledged 9 have bar- 
gained and sold, and by these presents do grant and convey unto 
said party of the second part, his executors, administrators and 
assigns, the manuscripts of two lectures, one being a lecture 
entitled: "Browning and his Cotemporaries," and the other 
entitled: " The Literary Life of Haivthome." 

To have and to hold the same unto the said party of the second 
part, his executors, administrators and assigns forever. And L 
do covenant and agree to and with the said party of the second 
part, that L am the owner and have the right to transfer said 
property, and will defend the same against any person or persons 
whomsoever. 

Ln witness whereof, L have hereunto set my hand and seal the 
first day of June, 1891. 

J. H. Gilmore. (Seal) 

It is not necessary for a bill of sale to be acknowledged, but 
if it is desired in order to make it more authentic, an acknowl- 
edgment may be added like this : 

acknowledgment. 

State of New York. ) 
County of Westchester. \ ss ' 

On this first day of June, 1891, before me, the subscriber, per- 
sonally appeared Joseph H. Gilmore, to me personally knozvn to be 
the same person described in and who executed the within instru- 
ment, and acknowledged that he executed the same. 

James M. Hunt, 

* Notary Public. 

Signatures to the Memorandum. — The memorandum must 
be signed in order to make it binding. In the case of the sale 
of the horse by Wiggins to Tuthill, there would not be a sale, 
binding on both parties, unless both signed the memorandum. 



SALES OF PERSONAL PROPERTY. 59 

If Wiggins signed it, Tuthill could compel Wiggins to deliver 
the horses and accept the money. On the other hand, if Tut- 
hill did not sign it, Wiggins could not compel him to receive 
the horses and pay the money. 

Property Included Within the Statute. — As originally 
enacted in England, the statute referred only to sales of "goods, 
wares and merchandise." In New York, and in many other 
States, the language used includes, "things in action," refer- 
ring to promissory notes, bonds, stocks and mortgages. A 
statute in this form would include nearly every species of per- 
sonal property. 

Sales on Trial. — This is a form of sale in which the prop- 
erty is delivered to the buyer upon his promise to return it, if 
not satisfactory. If it is to be returned within an agreed time 
it is the duty of the buyer to so return it. If no time is fixed 
it must be returned within a reasonable time. By keeping the 
property after the time agreed upon the buyer may become 
liable to retain it and pay for it. If it is taken for the purpose 
of testing or proving it, the buyer is bound to give it a fair and 
honest trial. He is not liable for any damage resulting to it, 
provided he uses proper care and discretion in trying it. 

Sales of Goods to Arrive. — This is a sale of merchandise 
expected to arrive by vessel from abroad. If the goods do not 
arrive as expected there is no sale unless it is the intention of 
the parties that the title shall pass to the buyer, and that he 
shall thenceforth take the chances of arrival. If the seller has 
the bill of lading he may transfer that to the buyer, and thence- 
forth his liability ceases. 

Sales by Sample. — This has come to be a very common 
manner of making sales. It is the method employed in all 
cases where sales are made by traveling salesmen ; the buyer 
selects from the line of samples carried by the "drummer" 
such goods as he desires. Upon such sales it is not necessary 
for the buyer to have it expressly agreed that the goods to be 
delivered shall correspond to the samples. That fact is always 
implied. Whenever goods are sold by sample the seller war- 
rants that they shall correspond in all respects to the samples 
exhibited. Upon the delivery of the goods the buyer is enti- 



60 BUSINESS LAW. 

tied to an inspection of them before accepting them ; if he finds 
they do not correspond to the samples he can refuse to receive 
them. It is his duty, however, to give the seller immediate 
notice, since, if he remains silent, he may be obliged to retain 
them. 

Conditional and Executory Sales, — The forms of sale just 
discussed are conditional sales, in that there are certain condi- 
tions attached to the sale. In the sale upon trial the condition 
is that the article shall prove satisfactory. The sale on arrival 
is upon the condition that the goods arrive, and the sale by 
sample is conditional upon the goods corresponding to the 
sample. The term " conditional sale " is also applied to every 
sale in which one of the parties is to perform some act, or some 
event is to happen before the sale is completed. An executory 
sale, although called such, is not strictly a sale ; it is merely 
an agreement to sell. A man may sell the wool which his 
sheep are expected to produce. It has a possible existence and, 
as w r e have seen, may be the subject of sale. A sale of a thing 
to be delivered at a future time is an executory sale ; in short, 
the term may be applied to all forms of sale w T hich are not 
completed. If the sale is completed, and the title has passed 
to the buyer and the property delivered, it is an executed sale 
and no longer executory. 

Delivery of the Property. — The terms of the sale having 
been agreed upon it is the immediate duty of the seller to de- 
liver the goods. The delivery here referred to is the actual 
transfer from the seller to the buyer. That is the common 
acceptation' of the term. In a more strict and technical sense 
the word sometimes denotes the transfer of title. It is suffi- 
cient for our purpose to refer to it in the sense denoting the 
transfer of possession, or, as is sometimes called, delivery of 
possession. 

The Time of Delivery. — If no time is fixed the seller is 
bound to deliver the thing sold within a reasonable time. 
What is a reasonable time will depend upon the circumstances 
of the case, such as the character and bulk of the articles sold, 
the distance they are to be carried, and the facilities for carry- 
ing them. If the time of delivery has been agreed upon it is 



SALES OF PERSONAL PROPERTY. 61 

the duty of the seller to deliver the goods within such agreed 
time, otherwise the buyer may refuse to receive them. It is 
important to observe that the seller is not bound to carry the 
goods to the buyer at a distance unless that is the agreement. 
If the buyer is to take the goods from the place where they are 
at the time of the sale, the seller's duty is simply to place the 
goods at the buyer's disposal, so that the latter can come and 
get them whenever he chooses. 

The Place of Delivery- — If the parties do not agree upon a 
place of delivery it is implied that the articles sold are to be 
delivered at the place where they are at the time of the sale. 

Constructive Delivery. — This refers to the delivery of pon- 
derous and bulky property which is incapable of being handled 
over. The delivery of the key to the premises where the prop- 
erty is located, or the delivery of the bill of lading, or the per- 
formance of any act on the part of the seller which indicates 
his intentions, amounts to a constructive delivery. 

Delivery to Carrier. — Where the buyer and seller reside at 
distances from each other, it is customary for the seller to de- 
liver the goods to a railroad company or other carrier, for 
transportation. The delivery of the goods to a carrier especially 
designated by the purchaser is equivalent to a delivery to the 
purchaser himself. If the purchaser does not designate the 
line of transportation to be used, it is the duty of the seller to 
deliver the property to the carrier engaged in transporting 
goods by the most feasible and direct route, and the route in 
ordinary use between the place of business of the buyer and 
that of the seller. If the seller agrees to carry the goods to the 
buyer, the risks of transportation rests upon the seller until 
they arrive at their destination, and the carrier has furnished 
the buyer a reasonable opportunity to receive them. 

Fraudulent Delivery. — This refers to sale and delivery 
without change of possession. The goods still remain in the 
custody of the seller although the sale is complete, and the 
title is in the buyer. The transaction is valid between the 
buyer and seller, but if third persons are injured or damaged 
by reason of it the transaction is invalid as to them. It is in- 
valid for the reason that the retention of possession by the 



62 BUSINESS LAW. 

seller is considered a badge of fraud, and third persons who are 
misled by the fact that the property is still in the possession 
of the seller, and buy it, provided the seller sells it a second 
time, will have the better title to it. The second sale avoids, 
the first. 

Payment and Tender. — The various rules regarding pay- 
ment and tender, as discussed under the head of contracts 
(page 23), are applicable to contracts of sale of personal prop- 
erty, and additional discussion is unnecessary. 

Warranty, as applied to sales of personal property, is an 
agreement on the part of the seller that the property cor- 
responds to his representations and description. The seller 
does not always warrant the thing sold, for he may expressly 
or by implication decline to warrant it. The warranty must 
be made prior to, or at the time of the sale. If made prior to- 
the sale, it must be made during the negotiations which lead to 
the sale. A seller may describe his horse to an intending piir«- 
chaser as sound and kind. If the conversation results in a sale* 
the seller has warranted his horse to be sound and kind. But 
if the conversation does not lead to a sale and the negotiations 
are broken off, the declaration would not be a warranty,, 
although the parties afterward came together and a sale 
resulted. Representations made after the sale is completed — 
the money paid and the property delivered— will not, in any 
case amount to a warranty. In brief, representations not made 
at the time of the sale and forming no part of the negotiations 
leading to the sale, will not constitute a warranty. 

What May Constitute a Warranty.— Any representations 
or assertions made by the seller, which purport to state facts 
about the thing sold, of which the buyer is ignorant, will con- 
stitute a warranty. If such statements or assertions are untrue,, 
the seller is accountable. It is immaterial whether or not he 
is aware of their untruth. 

Divisions of Warranty. — Warranty may be express or im- 
plied. An implied warranty may be either warranty of title 
or warranty of quality, and the tabular division is as follows : 

!I. Express. 
T v , jl. Warranty of title. 
2. Implied, -j 2> mrr anty of quality. 



SALES GF PERSOXAL PROPERTY. 63 

Express Warranty is an express statement made by the 
seller at the time of the sale. He may not use the word " war- 
ranty. ' In speaking of a horse which he is selling he may say 
that it is sound and kind, and we have seen that he makes a 
warranty. It is as though he should say: "I warrant the 
horse to be sound and kind." The representations and state- 
ments, of course, must relate to matters of which the buyer is 
ignorant. If the horse has lost an ear, the warranty would not 
extend to that defect, as it is open and visible. 

Implied Warranty of Quality. — This is a warranty which 
the law implies as to the merchantable quality of the thing 
sold. It is not implied when the buyer examines the articles 
and from their nature they are subject to complete inspection. 
When flour or sugar are sold by the barrel, there is an implied 
warranty that they are of merchantable quality and are reason- 
ably fit for the purpose for which they are ordinarily used. In 
case of a sale by sample, or by description, there is always an 
implied warranty that the goods will correspond to the sample 
and description. If the buyer states the purpose for which he 
wants the goods and the seller remains silent, there is an im- 
plied warranty that they are fit for that purpose. 

Implied Warranty of Title. — This is a warranty that the 
thing sold belongs to the seller, and that he has a right to dis- 
pose of it. The seller may not expressly assert that the thing 
is his in order to make a warranty. The law implies that, and 
he is accountable to the buyer if events prove that some one else 
has a better title. This kind of warranty arises only when the 
seller has the thing in his possession at the time of the sale. 
If it is not in his possession the buyer must be on his guard, 
and must require an express warranty. 

" The Purchaser Must Beware," is a legal maxim. He 
cannot be blind and deaf, provided the circumstances of the 
sale afford him an opportunity of using his ears and eyes to 
discover manifest defects. If the thing is open to inspection, 
and he fails to inspect it, he has no redress against the seller 
for defects, unless fraud and deceit were used to mislead him, 
or an express warranty is made by the seller. 

Stoppage Intrausitu. — This is the right of the seller who 



G4 BUSINESS LAW. 

has shipped goods to the buyer, to stop delivery. He can ex- 
ercise it - only in case the goods are actually in transit, unpaid 
for, and the buyer is unable to pay. If he knows that the 
buyer is insolvent at the time of the sale, he cannot take advan- 
tage of his right to stop delivery, nor can he stop delivery after 
the goods have come into the possession or under the control of 
the buyer. If any part of the purchase price is unpaid, the 
right of stoppage exists, providing all other conditions exist. 

The Exercise of the Right. — If the goods are in the hands 
of a carrier or transportation line, it is sufficient for the seller 
to inform the carrier that he claims the right to stop the goods 
and forbid their delivery. An ordinary business letter stating 
the facts is sufficient, and it might be worded something like 
this : 

Orilla, Ont., June 1st, 1891. 
To the Grand Trunk R. R. Co., 

Gentlemen : — / shipped by your line yesterday, consigned to 
Samuel Parsons, Rochester, N. Y. , ten car loads of lumber. 1 
have since received information casting doubts upon his solvency. 
I have the right of stoppage in transitu. Do not deliver the 
lumber, but hold it subject to my order. 

Yours respectfully, 

T. Depuy. 

The Rescission of a Sale. — This is the avoidance of it by 
one of the parties, or, in case it has not been completed, the 
refusal to complete it. There are five principal grounds upon 
which either party may rescind. They are : 

1. Mutual mistake. 

2. Fraud. 

3. Breach of warranty. 

4. Failure of consideration. 

5. Illegality. 
In the discussion of contracts, in the previous pages, the 

grounds were stated upon which either party might avoid a 
contract. They were substantially those given above as the 
grounds upon which either party may rescind a sale. The dis- 
cussion of them, which has been had, as applying to all forms 
of contracts, relates equally to contracts of sale. There is one 






SALES OF PERSONAL PROPERTY. 65 

ground of rescission however, which relates solely to contracts 
of sale and not heretofore discussed. It is: 

Breach of Warranty. — It applies in cases where the title 
has not passed to the buyer, and the sale was by sample or de- 
scription. Upon examination if the buyer finds that the goods 
do not correspond to the sample or description he may refuse 
to accept them, and may recover the purchase price or any part 
of it which he has paid. In case a rescission is desired on the 
ground of breach of warranty, or for any other of the reasons 
given, the party desiring to rescind must immediately restore 
the thing sold or the purchase price, as the case may be. He 
must restore the thing sold in substantially the same condition 
as when he received it, and he must do so immediately upon 
discovering the mistake, fraud, breach of warranty, or failure 
of consideration. 



QUESTIONS. 

Page 55. —What is personal property ? What is a sale of personal prop- 
erty ? What are the requisites of the contract ? Name the parties to a 
contract of sale. 

Page 56.— What is the subject matter of a sale ? What may it be ? 
What dealings amount to a sale ? What dealings do not amount to a sale ? 

Page 57. — When must a contract of sale be in writing ? What is a suf- 
ficient writing? What is a bill of sale? 

Page 58. — Who must sign the writing ? 

Page 59. — Define (1), sales on trial ; (2), sales of goods to arrive ; (3), sales 
by sample. 

Page 60. — Define conditional and executory sales. What is delivery of 
the property ? When should it be made ? 

Page 61 — What is the rule regarding the place of delivery ? What is 
constructive delivery ? What is the rule regarding delivery to a carrier ? 
What is fraudulent delivery ? 

Page 62. — What is warranty ? When must it be made ? What words 
will constitute a warranty ? Give the tabular division. 

Page 63. — What is express warranty ? What is implied warranty of 
quality ? Of title ? What is a purchaser bound to do regarding defects 
in property ? What is stoppage in transitu ? 

Page 64. — When and how is it exercised ? What is the rescission of a 
sale? What are the grounds of a rescission? 

Page 65. — What is breach of warranty? What must the party do who 
desires to rescind a contract on the ground of breach of warranty? 
5 



AGENCY. 



An Agent is any person employed by another to do any act 
for the employer's benefit or account. The business for which 
the agent is engaged is the agency. The agent may be any 
person of sufficient understanding to transact the business for 
which he is engaged. A minor though unable to make a con- 
tract in his own name, may act as agent for another. The 
employer is called the principal. The principal cannot be a 
person who is incompetent to make a contract. The principal 
cannot make a contract through an agent which he has not 
power to make himself. 

Appointment of Agents. — An agent may be appointed or 
employed for the agency, orally, or by an ordinary business 
letter. If the business, however, which the agent is employed 
to transact, involves the execution of a contract under seal, or 
the execution of any documents which must be sealed, then the 
appointment must be in writing and under seal. The appoint- 
ment is frequently made in writing also to enable the agent to 
exhibit the proof of his appointment and the extent of his 
authority. An appointment of this kind is called a power of 
attorney, and the ordinary form is as follows: 

POWER OF ATTORNEY. 

H now alt !#*» h\j Mm l&xmvXt, 

Tliat I, Nathaniel E. Weeks, of the City and County of New 
York, State of New York, have made, constituted and appointed, 
and by these presents do' make, constitute and appoint Vincent 
T. Bly of the same place, my true and laivful attorney for me and 
in my name, place and stead, to grant, bargain and sell all my real 
estate situate in said City of New York, and in my name to ex- 
ecute, acknowledge and deliver good and sufficient deeds of con- 
veyance of the same, tvith or without covenants of ivarranty. 
Also to collect, demand and receive the several amounts as they 

66 



AG EXC r. 6? 

fall due upon the coupons co\ with my rail urn/ stocks and 

bonds; giving and grunting unto my said attorney full power 
and authority to do and perform all and every act and thing 
■whatsoever requisite -and necessary to, be done in and about the 
premises, as fully to all intents and purposes as I might or could 
do if personally present, with full power of substitution and revo- 
cation, hereby ratifying and confirming all that my said attorney- 
shall lawfully do or cause to be done by virtue thereof. 

In Witness Whereof, I have hereunto set my hand and seed 
the 1st day of June, in the year of our Lord, one thousand eight 
hind red and ninety one. 

Nathaniel E. Weeks (Seal). 

UNITED STATES OF AMERICA, ) 

State of New York, >ss. 

City and County of New York. ) 

BE IT KXOWX, Tlicd on the first day of June, one 

thousand eight hundred and ninety one, before me 

_*_ personally appeared Nathan iel E. Weeks, above named, 

•j l. s. - ' who was to me known to be the person described in 

^^ ' and who executed the- above Poiver of Attorney, and 

acknowledged that he executed the same. 

Ik Testimony Whereof, / have hereunto sub- 
scribed my name, and affixed my seal the day and year 
first above written. 

James M. Hunt, 

Notary Public. 

When to be Acknowledged and Recorded. — If the agent 
is appointed to convey real estate, as in the form given, or to 
execute any papers which are to be recorded, then the power 
of attorney must be acknowledged, so as to entitle it to record 
under the same circumstances as the papers which the agent 
intends to execute. 

Authority of the Agent. — An agent appointed under 
power of attorney has no authority except that specially con- 
ferred by the power. If his authority is to be limited, the 
power uf attorney should be drawn accordingly. The power 
of attorney may be general in its form so as to confer upon the 



68 BUSINESS LAW. 

agent power to do any and all acts in connection with the par- 
ticular business, which the principal could do. 

Proof of Authority. — If there is a written appointment, as 
by power of attorney or letter, that will prove the agent's 
powers. If there is no written appointment, then the agent's 
powers and authority will be governed by the circumstances 
and the conduct of the principal. If a principal allows an 
agent to publicly transact business in his name, and makes no 
objection, he will be bound by the agent's acts. But he is not 
liable unless he has notice of the conduct of the agent and rat- 
ifies it by remaining silent. The representations and declara- 
tions of an agent, or one assuming to be an agent, are never 
sufficient to bind the principal or one for whom an agent 
assumes to be acting. Only the conduct of the principal him- 
self, will furnish a binding obligation. 

General and Special Agents. — A general agent has 
authority to transact all business coming within the usual extent 
and scope of his employment. The agent employed to conduct 
a store has power to transact all the business connected with 
the operation of the branch of trade conducted, whether each 
particular act has been specified or not. On the other hand 
the special agent has only such authority as has been specifi- 
cally conferred upon him. He can do only what he is especially 
and expressly told to do. Either a general or a special agent 
has such incidental powers as are connected with the business 
on hand. He may do that which is usual or customary as to 
the manner of transacting the particular or general business. 
If he is authorized to sell goods for instance, he may sell on 
credit, if that is the usual and customary manner of selling. 

Notice to the Principal. — It is a rule that whatever notice 
is communicated to the agent, or whatever knowledge is pos- 
sessed by the agent, is notice to the principal and the knowl- 
edge of the principal. The principal is chargeable with and is 
supposed to know, all that his agent does. If he fails to know 
it, it is his own neglect, for which he is chargeable. The rule 
in brief is : " Notice to the principal is notice to the agent." 

Liability of the Principal. — The liability of the principal 
extends, of course, to any act or contract which the agent may 



AGENCY. 69 

do or make within the scope of his authority. The principal 
himself may not be known in the transaction, but whenever 
his connection with it is discovered he can be held accountable. 
Moreover, the principal is liable for the wrongful acts of the 
agent. They must be such acts, however, as are performed by 
the agent in the transaction of the business in the ordinary and 
usual manner, and within the scope of the agent's employment. 
The conductor of a- train is an agent. He is given general 
supervision over the train and the passengers. If he wrong- 
fully expels a passenger while in the line of his duty and per- 
forming what he considers his duty, the railway company is 
liable. 

Liability of the Agent. — We have just seen that the agent, 
acting lawfully and within the scope of his appointment and 
authority, always causes his principal to be responsible for his 
actions. The agent is not himself personally responsible unless, 
(1) he acts fraudulently or unlawfully, or, (2) unless he agreed 
to become personally liable at the time he accepted the ap- 
pointment. If a conductor willfully and wrongfully strikes a 
passenger he is a wrong doer. If it is done while acting within 
the scope of his employment, he not only makes his principal, 
the railway company, liable, but he becomes personally liable 
for his wrongful act. If the agent commits a fraud without 
the knowledge of the principal he is personally liable. The 
principal however, must disaffirm the wrongful act or fraud 
of the agent as soon as it is known. By remaining silent or 
accepting the benefit of it he becomes liable, equally as though 
he expressly ratified it. The agent also becomes liable to third 
parties not only where he has agreed to assume the liability at 
the time of the appointment and where he has exceeded his 
authority, but also, where the principal is not known. If the 
principal is not known a person dealing with the agent enters 
into the contract upon the credit and the responsibility of the 
agent himself. If the principal's connections with the trans- 
action is discovered, at any future time, he may be held ac- 
countable. 

Reciprocal Rights of Principal and Agent. — The liabil- 
ities of the principal and agent which have just been men- 



70 BUSINESS LAW. 






tioned refer to their accountability to third persons — to persons 
with whom the agent transacts business. As between them- 
selves, the principal is bound to pay the agent the compensation 
agreed upon. If the compensation is not fixed upon by 
agreement, the agent is entitled to what would be a reasonable 
compensation under the circumstances. The agent on his part 
is bound to make proper accounting ; to act in good faith 
towards his principal ; and to transact his principal's business 
with ordinary skill and diligence. If he exceeds his authority 
or is guilty of positive misconduct and neglects or omits to 
perform his duty, he is liable to pay the principal the resulting 
loss or damage. For instance, if it is the duty of a cashier of a 
bank to present the notes held by the bank and demand pay- 
ment and he neglects to make a demand, and thereby the 
indorser is discharged so that the bank loses the amount, the 
cashier must pay the loss. An important rule relating to the 
good faith of the agent is this : an agent cannot act for two 
principals, that is, he cannot act for two parties to a contract. 
If he attempts to do so, neither will be bound by the contract 
and neither will be obliged to pay him compensation. A real 
estate broker cannot act as agent for the seller and as agent 
for the purchaser at the same time. If he effects a sale it is 
voidable by either of them, and he cannot collect commissions 
from either. 

Termination of the Agency. — It is the end of the agent's 
employment, and the end of his authority. At the time of the 
appointment or contract of employment, the parties may agree 
upon a period during which it is to continue, and the expira- 
tion of the period terminates the agency. If the employment 
is for the transaction of some particular business, the agency 
will terminate when the business is transacted. The agency 
may be terminated also by revocation on the part of the prin- 
cipal or by renunciation of the agent; that is, the principal may 
revoke the agent's authority at any time before it is executed, 
or the agent may renounce his authority by declining to act. 
Bankruptcy of either party will terminate the agency, as will 
also the insanity or death of either party. 



AGENCY. 71 

QUESTIONS. 

Page 66. — Who is an agent? What is an agency? Who may be prin- 
cipals and who agents? How are agents appointed? What is a power of 
attorney ? 

Page 67. — When must a power of attorney be sealed, acknowledged 
and recorded? How is an agent's authority limited and denned? 

Page 68. — What is the proof of an agent's authority? When are the 
agent's declarations proof of his authority? Distinguish between general 
and special agents. What is notice to the principal? What is the lia- 
bility of the principal? 

Page 69. — What is the liability of an unknown principal? When is an 
agent personally liable? When may the principal become liable for the 
agent's wrongful act? What are the reciprocal rights between principal 
and agent? 

Page 70. — What is the result if an agent attempts to act for two prin- 
cipals? How and when is the relation of principal and agent terminated? 



PAKT^EKSHIR 



The Contract. — Partnership is a contract whereby two or 
more persons mutually agree to employ their money and labor 
in a common business and divide the profits and share the losses. 
They may contribute equal or unequal amounts of money. They 
may divide the profits and share the losses equally or unequally, 
according to the terms of their agreement. If they contribute 
equal amounts of money and equal labor and skill, it is cus- 
tomary to divide the profits and bear the losses equally. Their 
common business constitutes the partnership, sometimes desig- 
nated a copartnership, and they are called a firm. 

Formation of Partnerships hy Written Contract. — If 
the business intended to be transacted is of some moment and 
involves the contribution of a considerable sum of money, it is 
customary to put the contract of partnership in writing to be 
signed and sealed. The written agreement is called the articles 
of copartnership. 

Form of the Articles. — No particular form of words is 
necessary. A writing after the manner of an ordinary business 
letter is sufficient so long as it expresses the intentions of the 
parties. It may state 

1. The names of the parties. 

2. The business in which they are to engage. 

3. The duration of the partnership. 

4. The several amounts of money which 'the partners are to 
contribute. 

5. The proportion of the profits and losses which each partner 
is to share and to bear. 

G. The firm name. 

7. The time which each partner is to devote to the business, 

8. It may also define the duties and powers which each part- 
ner is to perform and have. 

12 



PARTXERSRIP. 73 

There are many and various items which an attorney would 
insert, if employed to draw articles of copartnership, which are 
not essential to the agreement. The main thing is to express 
the intentions of the parties, whatever they are. Let the stu- 
dent attempt a draft of articles of copartnership. If the first 
trial does not cover the ground, the second may. 

Other Provisions. — The agreement may also provide for 
the various amounts which the partners may withdraw from 
the firm's cash, for his individual living expenses. It may pro- 
vide for books of account. It may provide for the dissolution 
of the partnership, and for such other special agreements as 
the nature of the business may demand. 

Formation by Oral Agreement is as valid as by written 
agreement. The written agreement is resorted to merely for 
greater certainty and to avoid future misunderstanding and 
dispute. The partners may come together before embarking in 
business, talk the matter over and come to a fall understand- 
ing of what each is to do. They thereby form a valid partner- 
ship. 

Formation Without Express Agreement. — Partnerships 
are sometimes formed without either articles of copartnership 
or oral agreement. This happens when two or more persons 
embark in any business or undertaking without having expressly 
formed a partnership in either of the ways previously men- 
tioned. In such a case the law implies a partnership and fixes 
the rights, duties and liabilities of each partner. It is a part- 
nership by implication. The law implies, among other things, 
that they are to bear the losses and divide the profits equally. 
If the amount of the profits and losses which each partner is to 
share and bear is not fixed by express agreement, it will be 
equal for each. 

The Test of a Copartnership. — In case no articles of co- 
partnership have been made and signed, or in case there has 
been no express agreement for a copartnership, it is frequently 
a question whether persons engaging in a joint enterprise, are 
copartners. The question is whether the acts of the parties 
result in a partnership by implication. If, in the conduct of 
the business, they have made a division of profits and mutually 



74 BUSINESS LAW. 

borne the losses, they are partners beyond question. That is a 
test. It is not^necessary that they should all contribute money. 
One may contribute the entire capital and the others contribute 
their skill and labor. Moreover., a division of the profits alone 
will not constitute them partners. An employee of a firm may 
receive a share of the profits as his compensation and yet not be 
a partner. If, besides sharing in the profits, he bears a propor- 
tion of the losses, he is a partner. 

Dormant and Special Partners.— A dormant partner is 
one who contributes money to the partnership capital but is not 
publicly known as a partner. He is a concealed partner. If 
his connection with the firm becomes known his liability is the 
same as that of the other partners, who are called the ostensible 
partners. A special partner is one who contributes a particular 
sum to a partnership business upon the agreement that he is 
only to be liable for the partnership debts to the amount of his 
contribution, and to draw profits accordingly. The partnership 
thus formed as to the special partner is called a limited part- 
nership. It is only possible in those States which have enacted 
a statute authorizing it. It is important to observe that, if a 
person holds himself out, or allows others to hold him out, to 
the world as a joint trader or copartner with such others, he 
will be liable as a partner, to those with whom the others have 
dealings. 

Liability of the Partners. — As between themselves, the 
partners may agree upon the liability which each shall assume 
by entering the partnership. As to all other persons however — 
all firms or persons with whom the partners transact business — 
each partner is individually liable for all the partnership in- 
debtedness. Each partner is liable for any act of another 
partner performed in the due course of the partnership busi- 
ness. Each partner is liable for the act of any other partner 
which is within the power of the other partner to perform. 
This liability refers to all cases of a general partnership. It 
does not refer to what has been termed a limited partnership. 
It is important therefore to know : 

The Power of a Partner. — Each partner has unlimited 
power to transact any business within the scope of the copart- 



PARTNERSHIP. 75 

nership and by his acts he hinds each of the other partners. 
It must be an act strictly within the scope of the partnership 
business. If a partner attempts to do something not within 
the scope of the partnership business but outside of its objects 
and aims, he becomes personally liable, but does not render the 
other partners responsible. One partner may bind the firm by 
his admissions and declarations, by misrepresentation in the 
purchase or sale of property connected with the partnership 
business. He cannot use the property or credit of the firm for 
his individual benefit, and he cannot give the firm note for his 
individual debts. He may give the firm note for a firm debt, 
and even against the will of his partners he may assign all the 
firm property in payment of a firm debt. 

Dissolution of the Partnership. — A partnership is dis- 
solved (1) by the expiration of the period agreed upon at the 
time it was formed; (2) by the mutual consent of all the part- 
ners at any time thereafter ; (3) by the act of one of the part- 
ners in making an assignment of his partnership interest, or in 
case no definite duration of partnership has been agreed upon, 
by his withdrawing or renouncing the partnership ; (4) when 
an amicable dissolution cannot be had, by the decree of a court 
having jurisdiction, on the ground of improper or fraudulent 
conduct on the part of one of the partners ; (5) by the death, 
insanity or bankruptcy of a partner ; and (6) by the sale of a 
partner's interest after judgment against him, or by the hap- 
pening of any other events which severs the unity of interest. 

The Effect of the Dissolution. — Immediately upon the 
dissolution occurring, and after the liquidation of. the firm's 
indebtedness, either of the partners is entitled to an accounting 
and a distribution of the partnership property. One partner 
can no longer bind the other partners by any individual act 
excepting such acts as are necessary to close up the partnership 
business. As to persons with whom a firm have been in the 
habit of dealing, however, one of the partners may have future 
dealings involving new business and new transactions, and 
thereby bind the others, providing notice of the dissolution 
has not been given. To avoid this, it is necessary and cus- 
tomary to give immediate notice of the dissolution to all persons 



76 BUSINESS LAW. 

with whom the firm has been accustomed to deal, both by pub- 
lishing a notice of dissolution in the newspapers and by sending 
notice by mail. 

QUESTIONS. 

Page 72. — What is partnership? How may the profits and losses be 
shared? What is customary if each partner contributes equal money, 
labor and skill? When is it customary to put the contract in writing? 
What is the written contract called, and what may it contain ? 

Page 73. — What is the main thing articles of copartnership should ex- 
press? What is said about the formation of partnerships by oral agreement? 
What is a partnership by implication, and what does the law imply? 
What is a test of copartnership? 

Page 74. — Under what circumstances may there be a sharing of profits 
without a copartnership? Who are dormant partners and what is their 
liability? Who are special partners? What are limited partnerships and 
when are they authorized? What is the liability of a general partner? 
To what extent may partners limit liability as between themselves? What 
power has one partner to bind the firm? 

Page 75. — How is a partnership dissolved? What is the effect of a dis- 
solution as to the power of one partner to bind the others? As to the 
rights of the partners? What notice of dissolution should be given? 



COEPOEATIOXS. 



The Definition. — They are associations composed of indi- 
viduals united in one body with a franchise from the State or 
government which enables the body to transact business as one 
person. They are sometimes called artificial persons, because 
they are composed of one or more natural persons acting as an 
individual. The term corporation is sometimes applied to the 
franchise itself, under which the corporation acts and derives 
its rights. The definitions frequently speak of one or more 
individuals as composing a corporation. In England it has 
been customary to give certain ecclesiastical officers, as a Bishop 
or Dean, the powers of a corporation, in order to clothe him 
with some legal capacity or advantage. This is not common 
in the United States where corporations are composed of more 
than one individual. 

The Object of Corporations. — The prime object is to 
enable the persons composing the corporation to act by one 
united will, and to continue the transaction of business beyond 
the life of a single individual. A partnership dies with the 
demise of one of the persons of a firm. The death, insanity or 
withdrawal of one of the individuals composing a corporation 
has no effect upon the corporation itself. 

Kinds of Corporations. — The two main divisions of cor- 
porationsare : (1) Eeligious or Ecclesiastical and (2) Lay. Lay 
corporations are again divided into : (1) Charitable and (2) 
Civil. Eeligious and charitable corporations have much in 
common so far as their objects are concerned. Church societies 
are religious corporations in all cases where they are incor- 
porated. Charitable corporations are formed for conducting 
various charitable enterprises, such as hospitals and homes for 
the sick and disabled. 

Civil Corporations, are such as are chartered or incorporated 
for transacting any lawful business. It is this class of corpora- 

77 



78 BUSINESS LAW. 

tions only to which particular attention will here be called. 
Strictly speaking, townships, school districts, Tillages and cities 
are civil corporations, but their discussion belongs rather to the 
lawyer's text-book. They are sometimes called quasi or political 
corporations. 

Creation of Corporations. — Corporations can haye no exist- 
ence unless sanctioned by the State or government. They are 
created by the State or government in two ways: (1) by charter^ 
or (2) by general statutes, called in corporation acts. Formerly 
it was customary to apply to the legislature for a charter. The 
charter was a special statute creating the corporation, and par- 
ticularly describing and specifying its powers and duties. The 
charter was its franchise, and when once obtained was con- 
strued to be a contract between the State and the corporation 
which could not thereafter be annulled or altered, unless the 
statute reserved such power in the legislature. To obviate the 
abuses w r hich arose by the granting of special charters, most 
States have now enacted a statute covering all the purposes for 
which the State is willing that corporations may exist, and pre- 
scribing a general method of incorporation. Any number of 
individuals, not less than a certain specified number, desiring to 
form a corporation have only to comply with the statute in 
order to become a body corporate. If they desire to engage in 
a business not authorized by the general acts of incorporation, 
they must still apply to the legislature for a special charter. 
Some States authorize the formation of corporations for the 
transaction of any legal business. 

Powers of Corporations. — They are : 

1. To have succession. 

2. To sue and be sued. 

3. To make and use a common seal. 

4. To purchase, hold and convey property. 

5. To appoint officers and agents. 

6. To make by-laws. 

The Corporate Powers, as the foregoing powers are called,. 
exist in all forms of corporations to a greater or less degree. 
They may be abridged or enlarged by the statute under which 
the corporation is created. The power of succession, for in- 



CORPORATIONS. 79 

stance, which is the power of the corporation to continue its 
existence, although some or all of the officers, stockholders and 
individuals composing it, should die or become incompetent, is 
limited to the term of existence authorized by the statute. In 
manv States, corporations cannot be formed for a longer dura- 
tion than fifty years. Sometimes there is a method provided 
by the State for renewing its existence at the end of that term 
for another period. The power to purchase and convey real 
property is frequently limited. The amount of real estate 
which a corporation may hold is ordinarily limited to some 
stated sum. This is especially so in the case of religious and 
charitable corporations. They are frequently exempt from 
taxation and, therefore, it is proper that the amount of prop- 
erty which they can hold, should be limited. 

Government of Corporations. — A corporation is governed 
by its charter if it has a special charter, otherwise by the in- 
corporation acts and statutes of the State where it is incorpor- 
ated. It has no powers except such as the legislature may have 
conferred by the charter or the incorporation acts. Its internal 
affairs are regulated by the by-laws it may adopt. They must 
not conflict with the laws of the State. The corporation is 
supposed to reside in the State where it is incorporated and at 
the place where it has its principal office for the transaction of 
business. Corporations organized in one State may carry on 
business in another, subject to the laws of the other State. In 
the State where it is incorporated a corporation is called a do- 
mestic corporation. In any other State it is called a foreign 
corporation. 

How a Corporation Acts. — It acts directly through its 
board of trustees or directors and indirectly through the stock- 
holders. The incorporation statutes specify ordinarily the 
names of the officers of the corporation. Besides a president, 
secretary, and treasurer, there is usually a board of officers called 
directors or trustees. All these persons are elected by the 
stockholders, and immediately upon their election the corpora- 
tion acts by their decisions or resolutions. An officer cannot 
bind the corporation by any contract he may make unless he 
has been empowered to make the contract by the board of di- 



80 BUSINESS LAW. 

rectors or trustees, and in dealing with an officer of a corporation 
it is necessary to first ascertain what powers have been conferred 
iil3on him by the by-laws or by resolution of the governing 
board. A corporation being a fictitious person, it always acts 
by an agent, who may or may not be an officer of the corporation. 

Stockholders. — They are the owners or holders of the capital 
stock of the corporation. The capital stock represents the 
corporate money and property. It is divided into shares of a 
specified value, most frequently $100. The profits made by 
the corporation are divided among the stockholders in propor- 
tion to the amount of the capital stock held by each. The 
profits are called dividends. • 

Liability of Stockholders. — This is wholly determined by 
the provisions of the statute under which the corporation is 
formed. In most of the States the stockholders are liable for 
the debts of the corporation only to the amount of their capital 
stock. They may lose what they put into the corporation — 
the amount of their stock — and no more. This exemption from 
liability, however, is usually conditioned upon the performance 
by the corporation of certain acts which the statutes say shall 
be performed, such as making correct reports annually of the 
state of the corporate business. The failure to perform the 
requirements of the statutes may subject a stockholder, trustee 
or director to the liability of paying all the debts of the cor- 
poration. The trustees or directors are held to a more strict 
and enlarged liability on the theory that they are more directly 
cognizant of and connected with the management of the cor- 
porate business. 

Transfer of Stock. — The right of continuous existence, 
which has been called the right of succession, necessarily in- 
volves the transfer of capital stock. In case of the death of a 
stockholder, his stock can be sold and transferred by his exec- 
utor or administrator. A stockholder may transfer his stock 
at any time by written assignment, although notice of the 
transfer must ordinarily be given to the company and a note of 
the transfer made on the stock books. 

The Corporate Seal. — The right to have and use a common 
seal is one of the incidental powers of a corporation. In case 



CORPORATIONS. A 81 

it becomes necessary for the corporation to execute a writing 
which must be sealed, the seal must be used. A corporation 
conveys real property and executes a conveyance by attaching 
its seal. In order to entitle an instrument to record it is pro- 
vided in most States that the seal must be affixed to the instru- 
ment by one of the officers, under the direction and authority 
of the board of directors or trustees. 

Dissolution of Corporations. — A corporation is dissolved 
(1) by the expiration of the time fixed by its charter or certifi- 
cate of incorporation ; (2) by act of the legislature expressly 
dissolving it for mismanagement or on grounds of public policy ; 
(3) by voluntary surrender of the franchise or charter. Im- 
mediately upon the dissolution it is usual for a court having 
jurisdiction to appoint a person, called a receiver of the cor- 
poration, who liquidates its obligations, distributes its property 
among the stockholders and winds up its affairs. 

JOINT STOCK COMPANIES. 

Joint Stock Companies are associations of two or more 
persons under a written agreement that they, or the persons to 
whom they may sell their interests, shall continue the associa- 
tion for a specified length of time sharing the losses and divid- 
ing the profits. Associations of this nature are only possible 
in those States where they are authorized by statute. The 
facility with which corporations may now be formed in most 
States, by reason of the general incorporation acts, has caused 
joint stock companies to come into disuse. The statutes usu- 
ally provide that the members or stockholders shall be individ- 
ually liable for all the indebtedness of the company. One 
member cannot of his own individual act bind the association, 
as in case of copartnerships. The association is always formed, 
by a written agreement signed by the members, and it continues 
for the time fixed in the agreement, although some or all of 
the original members may have died or become incompetent. 
Upon the death of a member, his estate is not released from 
liability, but the business goes on and his executors and admin- 
istrators are liable, as such, for the estate's proportion of the 



82 f BUSINESS LAW. 

losses, so long as the capital stock belongs to the estate. The 
association acts like a corporation, through agents appointed 
by the governing board, who may or may not be officers. 



COPARTNERSHIPS, CORPORATIONS, AND JOINT 
STOCK COMPANIES COMPARED. 

As to Formation. — A partnership may be formed by oral 
agreement. A corporation or joint stock company can only be 
formed by a written agreement or certificate of incorporation 
signed by the members or incorporators. 

As to Duration. — A partnership is dissolved by the death 
or incompetency of one of the members. A joint stock com- 
pany or corporation continues for the period fixed in the 
association agreement or certificate of incorporation, although 
one or all of the members die or become incompetent. 

As to Manner of Action. — A partnership business may be 
transacted by one of the partners with or without the knowl- 
edge of the others. One member of a joint stock company or 
corporation has not the slightest power to transact any business 
whatever, so as to bind the company or corporation, unless 
authorized by the oompany or corporation. 

As to Liability. — One member of a partnership is liable for 
any act or contract made by another member. It is a liability 
to pay any or all indebtedness contracted by any other member, 
out of private and individual means, after the partnership 
property is exhausted. A member of a joint stock company 
incurs substantially the same liability. A member of a cor- 
poration, called a stockholder, ordinarily incurs liability only 
to the amount of the capital stock which he holds. 

As to Liability After Dissolution. — A member of a part- 
nership, or the estate of a deceased member, ceases to be liable 
for any new transaction after dissolution, because a copartner' 
has no power to enter into a new transaction, provided due 
notice of the dissolution has been given. The estate of the 
member of a joint stock company or corporation continues to 
be liable either for the entire company indebtedness or to the 
extent of the stock held, until the stock is disposed of. 



CORPORATIONS. 83 

As to Division of Profits. — Members of a co-partnership 
share the profits according to the proportion they may have 
agreed upon at the time of the formation of the partnership. 
If they have made no agreement in that respect, the law will 
divide the profits equally, although one member may have con- 
tributed a much greater amount of money, or labor and skill, 
to the partnership business. The members of a joint stock 
company or corporation almost invariably share the profits, in 
proportion to the amount each has invested in the capital stock. 

As to Ownership of the Property. — The members of a 
partnership are joint owners of the partnership capital and 
property. Each is entitled to the possession of the whole. 
The members of a joint stock company or corporation are not 
joint owners of the corporation property. No member has a 
right to the possession of the whole or any part. The members 
are several owners of the capital stock issued to them. 



QUESTIONS. 

Page 77. — What are corporations? What are their objects? What are 
the divisions of corporations? 

Page 78. — In what ways are corporations created? What are charters, 
and what are general incorporation acts? What are the powers of corpo- 
rations? What powers are frequently abridged and how? 

Page 79. — How is a corporation governed? How do corporations act? 

Page 80. — Who are stockholders? What is their liability? How is 
stock transferred? What are the uses of a corporate seal? 

Page 81. — How are corporations dissolved? What are joint stock 
companies? 

Page 82.— Compare copartnerships, corporations, and joint stock com- 
panies: (1), As to formation. (2), As to duration. (3), As to manner 
of acting. (4), As to liability. (5), As to liability after dissolution. 

Page 83.— (6), As to division of profits; and (7), as to ownership of the 
profits. 



GUAEA^TT AND SURETYSHIP. 



Guaranty is an agreement whereby one person becomes 
responsible for the debt or default of another person. The 
courts and law books sometimes point out a slight distinction 
in the meaning of guaranty and suretyship. This distinction, 
however, is purely technical. It is sufficient for our purpose 
to consider them as meaning one and the same thing. Some- 
times the agreement is called guaranty and sometimes it is 
called suretyship. 

Formation of the Agreement. — The statute of frauds 
(page 20) decrees that " every special promise to answer for the 
debt, default, or miscarriage of another person " must be in 
writing. Therefore, the contract of guaranty and suretyship 
to be valid must be in writing, signed by the person who agrees 
to become responsible. 

Illustration of the Contract. — If Adison R. Butler is 
offered a situation as assistant teller in the banking house of 
Granger & Wardwell on Wall Street, they may require some 
one to guarantee his faithfulness, and he requests his acquaint- 
ances, Messrs. Benham and Works, to act as sureties. The 
writing which is given need not be of any particular form so 
long as it expresses the intention of the signers to become his 
sureties. An informal agreement of this kind is sufficient for 
the specified purposes. 

CONTRACT OF GUARANTY. 

Whereas, Addison R. Butler is about to be appointed assist- 
ant teller by Lyman H. Granger and Edward J. Wardwell, com- 
posing the firm of Granger & Wardwell, bankers and brokers, 
Wall St., N. Y., who require a guaranty of his fidelity: Now 
therefore, we, in consideration of one dollar to us in hand paid, 
hereby agree to and with said Granger & Wardioell that we will 
save them from all loss, harm, or damage arising directly or indi- 

84 



GUARANTY AND SURETYSHIP. 85 

redly through the failure of said Butler to faithfully discharge 
his duties in such position, or through his failure to account for 
and pay over and deliver all moneys and property which may 
come into his possession or under his control. 

Witness our hands and seals this 1st day of June, 1891. 

William K. Benham (Seal.) 
Adam C. Works (Seal.) 

The Parties. — The illustration discloses that there are 
three parties to the agreement, as there are always three parties 
to the agreement of guaranty and suretyship. Butler is the 
principal debtor. He is the one who is primarily liable to per- 
form the obligations imposed, and is called the principal. 
Granger & Ward well are the creditors or the parties for whom 
the duty is to be performed, and Benham and Works are the 
guarantors or sureties. 

The Principal and Collateral Contract. — The principal 
contract is between the firm of Granger & Wardwell, one party, 
and Butler, the other party. The collateral contract is be- 
tween Granger & Wardwell as one party, and the sureties as 
the other party. In case Butler fails to perform his part of the 
contract by not rendering faithful service, there is a breach of 
the principal contract, and the collateral contract, which is the 
agreement by Benham & Works that he will perform them, is 
enforceable. 

Other Forms of the Writing. — The writing which has 
been given as an illustration is an unlimited guaranty. It cov- 
ers all loss or damage that Granger & Wardwell may suffer for 
all the time Butler may occupy the position. It is customary 
in practice in such a case, to have a writing drawn in the form 
of a bond. The amount of the penalty is fixed and the sureties 
or bondsmen are liable only to the amount stated in the bond. 
The term " bondsmen v is ordinarily and usually applied to 
sureties or guarantors who become responsible for a duty to be 
performed by another. The waiting may be so drawn as to 
limit the time for which the guaranty holds good, and it may 
be drawn also so as to describe and define the particular acts 
for which the guarantor may become liable. If it is a guaranty 
of credit — for the payment of goods to be sold to another — it 



86 BUSINESS LAW. 

may be continuing, that is, it may be a guaranty for the pay- 
ment of goods successively sold, up to a specified value, within 
a specified time. 

The Consideration of the Contract. — In the writing given 
for illustration, the sum of one dollar is recited as a considera- 
tion. This is called a nominal consideration, and is entirely 
sufficient. The words " for value received" render the contract 
valid. If the contract is made before or at the time of the 
making of the principal contract, the principal contract itself 
is a consideration for the collateral contract. If made after the 
making of the principal contract, to use the illustration, after 
Butler has commenced his duties, there must be a new consid- 
eration coming either from Butler, or from Granger & Ward well, 
to the sureties, in order to make the guaranty valid. 

The [Liability of Sureties. — The surety or the guarantor 
cannot be sued upon his contract of guaranty and suretyship 
until the principal for whose credit and faithfulness he has as- 
sumed responsibility has made default in not complying with the 
terms of the contract. There must be a breach of the principal 
contract before resort can be had to the collateral contract. 
Moreover, the liability of the guarantor is strictly confined to 
the terms of the written guaranty. In the illustration, the 
guaranty is for a faithful performance of the duties of assistant 
teller, and the guarantors can only be held responsible for 
unfaithfulness of Butler while performing the duties of that 
position. If Granger & Wardwell allow Butler to perform the 
duties of cashier, a far more* responsible position, and thereby 
increase his opportunities for unfaithfulness, the guarantors are 
not liable for loss resulting thereby. 

Suretie's Rights Against the Principal. — If the surety or 
guarantor is obliged to pay the debt of his principal he may 
proceed immediately to collect of the principal whatever he has 
paid. If the creditor has securities given by the principal, the 
surety is entitled to them, in order to protect himself. In 
other words, the surety is entitled to all the rights which the 
creditor may have against the principal. This is called the 
right of subrogation. 

Rights Between Sureties. — If two or more sureties have 



GUARANTY AND SURETYSHIP. 87 

signed a contract of guaranty, in other words have become 
bondsmen, they are bound to contribute equally to make the 
guaranty or bond good. They may be strangers to each other 
at the time of the execution of their contract and may have 
executed it wholly independent of each other, but if their prin- 
cipal fails to perform what they agree he should perform, then 
each becomes equally liable. The creditor is not obliged to 
collect of each in equal proportions. Granger & Ward well, the 
creditors in the illustration, may collect their w T hole loss or 
damage of either Benham or Works, as they prefer. If they 
do so, however, then the surety who pays the loss may sue his 
co-surety for his proper proportion. 

Discharge of Sureties. — A surety may be discharged or 
relieved from liability upon the contract of guaranty ; (1) by 
the expiration of the time for wdiich the guaranty is given, 
whenever that time is expressed , (2) by the surety giving 
notice to the other parties, in case the guaranty is given for an 
unlimited time, that he elects to terminate the contract and 
will no longer be responsible ; (3) by the creditor and principal 
entering into a different arrangement or agreement from that 
contemplated and referred to in the contract of guaranty, or 
altering the contract itself by erasure or interlineation ; (4) bv 
extension of the time of payment, whenever the guaranty is for 
the payment of a debt or the performance of a duty at a speci- 
fied time. When that time arrives if the creditor wishes to 
hold the surety responsible lie must strictly enforce the prin- 
cipal's agreement. Whenever the debt is due he must not give 
the principal further time to pay it. He need not sue imme- 
diately. It is sufficient if he at all times may sue. He releases 
the surety only w T hen he makes an agreement with the principal 
for an extension of time whereby he cannot sue the principal 
or collect the debt until the expiration of the time ; (5) by 
fraud practiced upon the surety by the creditor, or by the 
principal with the creditor's consent. Fraud vitiates every 
contract. 

Guaranty of Payment and Collection. — This usually re- 
fers to a guaranty of payment of commercial paper, negotiable 
or non-negotiable. It may refer to a guaranty of payment or 



bo BUSINESS LAW. 

collection of any written contract to pay money. Referring to 
guaranty of negotiable paper (page 52), it is seen that there is 
quite a distinction between guaranty of " payment" and guar- 
anty of "collection. " Guaranty of payment is an agreement 
by the surety that if the amount is not paid when due, the 
surety will immediately pay it without any effort having been 
made to collect it from the principal. Guaranty of collection 
is an agreement by the surety that he will pay it after due legal 
proceedings have failed to collect it of the principal. In the 
first case the surety may be sued immediately upon the failure 
of the principal to pay the amount when due. In the latter 
case the surety can be sued only after the principal has been 
sued. 

QUESTIONS. 

Page 84. — Define guaranty. What is said regarding the distinction be* 
tween guaranty and suretyship ? How is the agreement formed ? What, 
if any, are the requisites of the writing ? 

Page 85. — Name the parties to the contract. Distinguish between the 
principal and the collateral contract. What other forms of the agree- 
ment are usual, besides the one used for illustration? 

Page 86. — What consideration is necessary ? What is the liability of 
the sureties ? What are the sureties' rights against the principal ? What 
are the rights between sureties ? 

Page 87, — How may sureties be discharged ? Distinguish between 
guaranty of payment and guaranty of collection. 



COMMON CAREIEES. 



Common Carriers are such persons or corporations as un- 
dertake to carry freight or passengers for hire. They hold 
themselves out to the world as ready and willing, under all 
circumstances, to transport the persons or goods of all who 
choose to employ them. 

Two Kinds. — Common carriers are either (1), inland car- 
riers who transport by land or water or (2), carriers by sea. 
Carriers by sea have necessarily only one mode of conveyance. 
Inland carriers may transport by railway, steamboat, stage 
line or truck. A man who holds himself out as in the business 
of conveying goods or passengers from one part of a city to 
another by truck or hack, comes within the definition of a com- 
mon carrier. 

The Obligation to Carry. — A common carrier is under ob- 
ligations to take all goods and passengers that come, provided 
his means of transportation are adequate and a reasonable com- 
pensation is offered. We have seen that he is not a person 
who transports goods or passengers occasionally at his pleasure 
or for want of other employment. It is his business, and 
therefore the law makes it his bounden duty, to receive and 
carry all that comes, without discrimination. If he discrimi- 
nates or unlawfully declines, he is liable to pay damages. The 
business is mainly confined to corporations, such as railway, 
steamboat and express companies, and when we speak of " his" 
liability we mean an artificial person as well as a natural person. 
The carrier may refuse to carry passengers not in a proper con- 
dition to be received, as for instance a drunken or an insane 
man, who might endanger his fellow passengers. He may re- 
fuse to carry dangerous articles or articles improperly packed. 

The Compensation. — The price for carrying is frequently 
fixed by the agreement of the parties. If not so fixed, the 
carrier can collect what will be a reasonable compensation in 

89 



90 BUSINESS LAW. 

view of the duty performed. Many States have wnat are called 
railroad commissions appointed and authorized by legislative 
statutes, who fix the rates of transportation within the State. 
The United States railroad commission has general supervision 
over all carriers whose lines extend through the different States. 

The Contract. — When you deliver your goods to a carrier, 
or apply yourself, to be transported and the carrier undertakes 
to transport, whether the compensation is paid in advance or 
to be collected at the end of the route, the contract thereby 
entered into between you and the carrier is certain and definite. 
It is this : The carrier agrees to transport you, or your goods 
safely, to the required destination. He agrees not only to carry 
but to carry safely, and he is liable for any injury, excepting 
injury arising " by act of God or the public enemy ;" meaning 
any accident produced by physical cause which cannot be 
guarded against, such as lightning and hurricane, an extraor- 
dinary flood, or attack by the army of a nation with which 
your nation is at war. The carrier is not even excused from 
loss occurring from any of the causes named, provided the 
accident could have been averted by proper care and caution. 
In short, the carrier is an insurer against loss or damage during 
transportation. ' The mere fact that loss or injury occurs, gives 
rise to the presumption against the carrier, that there has been 
negligence and want of care. No form of contract imposes a 
larger or more strict liability than the contract for the trans- 
portation of passengers or freight. It is sometimes said that 
the carrier of passenger does not assume the same liability as 
the carrier of goods. The law, however, holds him to the 
exercise of extraordinary care. It compels him to do all that 
human skill and foresight can do to avoid accident, and there- 
fore the liability assumed is little less than that resting on the 
carrier of goods. 

The Termination of the Liability. — The liability does not 
terminate until the carrier has fully performed his duty. His 
duty is not performed until he has safely deposited the passen- 
gers or goods at the proper destination. In case of a passenger 
it is not enough to bring the passenger to the station. The 
liability continues until the passenger has had a reasonable 



COMMON CARRIERS. 91 

opportunity to alight and leave the carrier's grounds and build- 
ings. In case of freight the liability continues until the owner 
has had a reasonable opportunity of taking the goods away. If 
they are not taken directly from the vehicle of transportation 
within a reasonable time, it is the carrier's duty to place them 
in a proper warehouse from which the owner can receive them. 
That is the custom usually followed. After they have been 
placed in the warehouse, the carrier is no longer held to the 
strict liability as carrier. The liability is then that of a ware- 
houseman, who is merely bound to use ordinary and reasonable 
care. 

Limitation of Liability. — The carrier may limit his liability 
as to amount or as to the nature of the damage for which he is 
to be responsible. The limitation can only be effected by an 
express agreement, entered into at or before the goods or pas- 
sengers are received. The agreement must be a condition and 
a, part of the contract of carriage. It must be clear and defi- 
nite. It must be entered into with the full knowledge and 
assent of the passenger or owner of the goods. The mere fact 
that there is a condition limiting liability, printed on a ticket 
sold, or on a bill of lading, will not bind a passenger or a ship- 
per, unless it is brought to his notice and he assents to it. 

Delivery by Carrier. — A common carrier must deliver 
freight according to address or instructions and is liable for a 
delivery at the wrong place or to the wrong person. Delivery 
is largely regulated by custom. A railway company ordinarily 
delivers goods only at a station. On their arrival it is the duty 
of the company to give due notice to the person entitled to 
receive them, and as we have already seen, if they are not taken 
away, the company is then obliged to place them in a proper 
warehouse. In such case, it has a lien on the goods for storage. 
An express company is bound to make actual delivery at the 
place of business or residence of the consignee. A carrier by 
sea is bound simply to unload the goods at the customary wharf 
or pier, having given due notice to the consignee of their 
arrival. 

The Carrier's Lien. — If the compensation for the trans- 
portation of goods is not paid in advance the carrier has a lien 



92 . BUSINESS LAW. 

upon them for the amount. That is, he may claim and with- 
hold possession of them until the compensation is paid. Unless 
the compensation is paid in advance by agreement the carrier 
of the goods cannot collect it until the goods are ready for 
delivery. The rule of law is that, in the absence of a contrary 
agreement, compensation for carriage of freight is not due until 
the goods are ready for delivery at their destination. 

The Baggage of Passengers. — The sale of a ticket to a 
passenger carries with it the right of the passenger to have 
carried for him ordinary personal baggage to a reasonable 
amount. Just as he may limit his liability for goods, the car- 
rier may limit his liability for baggage. The agreement, how- 
ever must be fully and mutually entered into. By "personal 
baggage," is not meant merchandise which the passenger may 
wish to be transported, but only such things as are usual and 
necessary for a traveler to carry with him for his personal com- 
fort and use considering the nature and extent of his journey. 
If he wishes to carry articles not properly included in the per- 
sonal baggage of a traveler, he must call the carrier's attention 
to the fact and thus secure the carrier's consent and, if required, 
pay the extra compensation. 

QUESTIONS. 

Page 89.— Define common carriers. What are their divisions ? What 
is the extent of the duty of a carrier with reference to receiving freight or 
passengers ? What is the carrier's compensation ? 

Page 90. — What is the carrier's contract and liability ? When does the 
liability terminate ? 

Page 91.— How may the liability be limited ? What is not sufficient to 
limit the liability ? What is the carrier's duty regarding delivery ? If 
freight is not delivered to and received by the consignee, what is the car- 
rier's duty regarding it ? What is the carrier's lien ? 

Page 92. — What is a carrier's duty regarding baggage, and what is 
baggage ? 



IKXKEEPEES. 



Innkeepers are persons or corporations maintaining public 
houses for the entertainment of travelers and guests. Like 
common carriers, innkeepers are lawfully bound to receive the 
traveler and his baggage. They must entertain all persons 
who apply for entertainment in a proper condition to be re- 
ceived and able to pay the price. The innkeeper holds himself 
out to the world as in the business of entertaining guests. He 
is not like a boarding house keeper who accepts such as he 
chooses and enters into a special contract with the boarder, at 
a fixed rate, before the entertainment commences. No express 
contract is necessary to create the relation of landlord and 
guest. The reception of the guest by the innkeeper or land- 
lord, as he is usually called, gives rise to the contract by impli- 
cation. 

Who are Guests. — They are all such persons as come to 
the inn for the purpose of being entertained. They must go 
there with the intention of becoming guests, expecting to pay 
the usual compensation charged by the inn. The law presumes 
it to be, and it must be, a reasonable compensation. The guest 
is entitled to reasonable entertainment, considering the circum- 
stances of the inn. He is bound to accept such accommodations 
in such rooms and at such tables as the landlord may designate. 

The Landlord's Liability. — The innkeeper is liable for any 
loss or damage which may occur to the property of the guest. 
The liability is substantially the same as that of a common 
carrier for the goods he attempts to carry. If the guest is 
robbed, either by burglars or dishonest servants of the inn, the 
landlord is responsible, unless the robbery resulted from the 
guest's carelessness. The responsibility commences whenever 
the guest's baggage comes within the landlord's care. It may 
be the delivery of a check to the hotel porter at the railway 
station, or it may be by placing baggage at any point within 

93 



94 BUSINESS LAW. 

the precincts of the inn, providing the attention of the landlord 
or his servants is called to the fact. It continues until the 
guest has settled his bill and taken his permanent departure. 

Limitation of the Liability. — In many States there is a 
method provided by statute, by which the landlord may limit 
his liability. The statutes usually require the landlord to post 
notices in all rooms and at other conspicuous places in the hotel, 
to the effect that he will not be liable for money or valuables 
unless deposited with the clerk at the office. The statutes 
must be strictly complied with. The exemption does not apply 
to such articles as the traveler may require to use and which 
his convenience requires shall be taken to his room. Many 
States have enacted statutes prescribing yarious conditions and 
restrictions regarding hotel keeping besides the method of lim- 
iting liability. 

The Landlord's Lien. — Hotel keepers may demand com- 
pensation for entertainment in advance. If it is not paid in 
advance they may hold possession of the guest's property and 
baggage until the bill is settled. In any event, possession of 
baggage may be retained until the compensation is paid. 

Boarding House Keepers, unlike innkeepers, are not bound 
to receive and entertain all who come. The boarding house is 
not supposed to be open to the public at large and the proprietor 
does not assume the liability of a hotel keeper. A hotel keeper 
may take boarders, however, and not assume the innkeeper's lia- 
bility toward them. At the same time the guest at a hotel 
may make a bargain for his entertainment by the week, and yet 
the circumstances not be such as to relieve the landlord from 
his liability as innkeeper. The intent of the parties has much 
to do in deciding whether a person is a boarder or a guest. In 
some States the statutes give boarding house keepers a lien on 
the boarder's personal effects, for board bills. 

QUESTIONS. 

Page 93.— Who are innkeepers? Who are guests? What is the land- 
lord's liability ? 

Page 94— How may it be limited? What is the landlord's lien? Dis- 
tinguish boarding house keepers from innkeepers. 



CONTRACTS OF HIRE. 



Contracts of Hire, are agreements concerning personal 
property whereby a compensation is to be paid for its use, or 
for labor and services to be performed about it. There are 
four classes of these contracts. They are (1) hire of things, 
(2) hire of services, (3) hire of custody, (4) hire of carriage. 

The Hire of Things, is a hiring of the use of personal prop- 
erty for a compensation. The owner lets the property to the 
hirer. The owner's liability is slight. He must not interfere 
with the possession of the thing after he has delivered it to the 
hirer. He does not warrant the safety or utility of the thing 
for which it is let, excepting by express warranty. At the 
same time, if for instance, he keeps a livery stable, he must 
not let to a customer, a horse which he knows to be unruly and 
vicious, and which may endanger the life and safety of the hirer. 

The Hirer's Liability, is limited to the exercise of ordinary 
prudence and care in the use of the thing hired. If he hires a 
horse he must feed, water and drive it with such care and fore- 
sight as a man of reasonable prudence would exercise in the 
management of his own property. He is answerable for ordinary 
neglect. His responsibility continues as long as the property 
is under his care or the care of his servants. He is bound to 
use the property in the manner agreed upon and for the pur- 
pose for which he engaged it. If he hires a horse to drive to a 
certain place and drives it to a much greater distance, he is 
liable for any resulting damage. If he hires a horse for a drive 
he cannot use it for any other purpose. If he does so and it is 
injured or killed, even without his neglect, he is guilty of con- 
verting it to his own use, or of "conversion," as the law calls 
it, and he is bound to bear the whole loss. When he is through 
with it, he is bound to return it to the owner in as good condi- 
tion as when he received it, excepting natural wear end una- 
voidable accident. 

95 



96 BUSINESS LAW. 

The Hiring of Services. — This does not refer to the hiring 
of* an employee at a stated salary for a stated time. It refers to 
the hiring of services for the purpose of performing some work 
about an article of personal property, as when a watch is deliv- 
ered to a jeweler to be repaired and returned. 

The Workman's Liability. — The workman is liable for 
failure to use that degree of skill and caution which the nature 
of the service demands. The degree of care and diligence 
which he must use, depends upon the skill required to perform 
the service. If the contract is for the exercise of the personal 
skill of the workman, he cannot delegate the work to a servant. 
The jeweler might turn over the watch to one of his workmen 
to be repaired, but if you employ a portrait painter, in whose 
personal skill you have confidence, to retouch a family portrait, 
he must do the work himself. If the materials are furnished 
the workman he must use them. He cannot use others. He 
is not liable for damage so long as he has used ordinary care 
and prudence in the care of the article while in his hands. If 
the property is destroyed by fire arising without fault of his, 
the owner and not the workman suffers the loss. 

The Hiring of Custody. — It is an agreement for the keep- 
ing and care of personal property for a compensation. There 
are four classes of persons who undertake to keep and care for 
property. . They are (1) warehousemen, (2) wharfingers, (3) for- 
warders, and (4) agisters of cattle. 

The Duties Undertaken. — Warehousemen agree to keep 
and care for property intrusted to them for storage, in build- 
ings or warehouses provided for the purpose. In all large 
cities, storage warehouses are established for the convenience of 
persons who desire to store goods. The owners occupy the 
position of warehousemen. Common carriers become ware- 
housemen as soon as they have placed goods which they have 
carried, in the freight houses or places provided. Wharfingers 
keep wharves and piers for the purpose of receiving and ship- 
ping goods. The ocean steamship companies do not ordinarily 
own the wharves or docks where they receive and land passen- 
gers or goods. The dock owners or wharfingers receive a 
compensation from the shipper of goods called "wharfage." 



CONTRACTS OF HIRE. 97 

Forwarders receive and forward goods. Agisters of cattle are 
such as receive cattle or horses for pasturage, or to be cared for 
in boarding stables. 

Their Liability and Rights. — Any of these persons who 
undertake to receive and care for property for a compensation, 
are bound to use ordinary care and diligence in the keeping of 
the property. They are liable for ordinary neglect. They 
have liens upon the property, or may hold possession of it, 
until their compensation is paid. If the compensation is not 
fixed by agreement, they are entitled to a reasonable compen- 
sation. 

AVhen Xot Liable. — Whenever persons of this character, or 
persons who do not make it their business, consent to receive 
and care for property, without compensation, they are not 
liable for loss, unless grossly negligent. They would be con- 
sidered grossly negligent in case they failed to exercise that 
ordinary care which every man of common sense, however 
inattentive, takes of his own property. 

The Hiring of Carriage. — This is an agreement made with 
common carriers for the carriage of goods, and it has been 
already fully discussed. 

QUESTIONS. 

Page 95. — What are contracts of hire? Name the four classes. What 
is the hire of things, and what is the owner's duty and liability? What is 
the hirer's liability? 

Page 96. — What is the hire of services? What is the workman's lia- 
bility? What is the hiring of custody? What are the duties undertaken? 

Page 97. — What is the liability of the persons undertaking the care of 
property for a compensation? What is the liability if they do not receive 
a compensation ? 



INSURANCE. 



Insurance is a contract by one party, called the insurer, to 
indemnify another party, called the insured, against loss or 
damage. The loss or damage against which the insured is 
indemnified depends upon the kind of insurance, of which 
there are three: (1) life, (2) fire, (3) marine. Accordingly 
there are three ordinary losses against which the insurer under- 
takes to indemnify. They are (1) loss by death; (2) loss by 
fire; and (3) loss by the perils of the sea. 

Indemnity Against Loss by Death, is life insurance. It 
is supposed that some one suffers loss by the death of every 
person, and the contract of the insurer is usually to pay a cer- 
tain sum of money to a person named in the agreement, upon 
the occurence of the death of the insured. The person to 
whom the money is to be paid is called the beneficiary. The 
agreement is primarily to pay upon the occurence of death. 
The money may be payable to the insured himself, however, 
when he reaches a specified age, providing he survives until 
that time. The contract is always in writing, as in all cases, 
of insurance. It is called the insurance policy. 

Indemnity Against Loss by Fire, is fire insurance. The 
contract is to pay the person insured damages resulting from 
fire, either to buildings or goods, not exceeding the maximum 
sum named in the policy, In case of total destruction of the 
property insured the maximum sum is to be paid, providing 
the property is worth that amount. In case of partial destruc- 
tion the actual damage is to be paid. Fire insurance policies, 
sometimes cover loss by lightning. They do not cover loss by 
tornadoes, 'but hurricane or tornado insurance is common in 
those States subject to wind storms. 

The Policies. — In most of the States, statutes have been 
enacted prescribing the terms of the contract. That is, the 
conditions which shall be contained in the policy. In order to 



INSURANCE. 99 

ascertain what agreements a policy cannot or must contain, 
examination should be had of the statutes of the State where 
the property is located and where the insurance is effected. In 
the State of New York, for instance, all fire insurance policies 
are alike. Each company engaging in the business of insurance 
there is bound to make the same terms and conditions and to 
issue the same form of policy. There is not the same uniform- 
ity with regard to life insurance policies. Greater latitude is 
ordinarily allowed in most of the States in the matter of the 
terms to be inserted than in case of fire insurance policies. 
Nearly every life insurance company has some particular or 
special form of policy, or some special agreement which is in- 
serted in its policies, and which is offered as an attraction to 
persons desiring insurance. 

Usual Conditions of Fire Insurance. — There are certain 
conditions which are inserted in fire insurance policies in nearly 
all States. For instance, the insurance company is only liable 
for the actual loss sustained, although the property may be 
totally destroyed, and the maximum amount specified in the 
policy is greater than the actual loss. Any change in the loca- 
tion, condition, or use of the property made after the policy is 
issued which increases the risk, avoids the policy. The insured 
must have an insurable interest, that is, such an interest in the 
property as authorizes him to protect it by insurance in his own 
name. The insurance company is entitled to immediate notice 
of the loss, accompanied by such proofs as it may demand ac- 
cording to the terms of the policy. 

Usual Conditions of Life Insurance. — The policy usually 
becomes void by the failure of the insured to pay the premium 
when due. The premium is the compensation paid the insurer 
for the undertaking of indemnity. In case of life insurance it 
is ordinarily payable annually or semi-annually. In case of fire 
insurance it is payable m advance for the whole term of the 
policy. Life insurance is avoided in case the insured removes 
his residence beyond the seas, or to another place and thereby 
effects his chances of life. For instance, the insured is not 
allowed to travel in tropical countries, where he would be sub- 
jected to the dangers of cholera or yellow fever. 



100 BUSINESS LAW. 

Fraud and Concealment. — Any deceit practiced by the 
person securing the insurance regarding the property insured, 
in case of fire insurance, or regarding his own health, age, and 
the like, in case of life insurance, avoids the policy. Likewise 
any concealment of facts which the insurance company should 
know avoids the policy. It is scarcely necessary to repeat that 
fraud vitiates every contract. 

Representations and Warranties. — Any representations 
made by the insured which are material to and effect the risk 
and which are false or fraudulent, will avoid the policy. Such 
representations are ordinarily all statements of fact concerning 
which the company inquires before accepting the risk. Any 
statements made in the policy itself which are false or fraudu- 
lent, are in the nature of warranties and render the policy 
absolutely void at the election of the company. 

Accident Insurance. — In addition to the kinds of insur- 
ance which have been mentioned, the business of accident 
insurance has assumed, within recent years, large proportions. 
It is in the nature of indemnity against loss or damage by 
accidental means. In order to collect loss under the policy, 
the insured must usually have suffered some outward and ex- 
ternal accident, producing a visible effect. 

Hints About Insurance Policies. — Read your policies. 
Be careful regarding the truth of the statements you make at 
the time of applying for insurance. 

An untruth in the written application which you are obliged 
to make for life insurance, or an untruth orally stated m ap- 
plying for insurance on property, may be taken advantage of 
by the company. 

If you desire some condition inserted in the policy which is 
not in the ordinary policy issued by the company, or desire 
insurance subject to any special agreement not ordinarily made 
by the company, see to it that the condition or special agree- 
ment is assented to by the home officers of the company. 

An ordinary insurance agent has no power to bind the com- 
pany by any arrangement or agreement he may make outside 
of the usual course of the business. 

In case you desire to assign your policy, secure the consent of 



INSURANCE. 101 

the company. An assignment without such consent usually 
avoids the policy. 

In case you desire to make a change in your residence or in 
the use and location of property insured, secure the consent of 
the company. Any change enhancing the risk, avoids the 
policy. 

Having carefully read your policy you may discover that 
you have no insurance. The reason is that the ordinary policy 
contains many exceptions, reservations and conditions which, 
if strictly construed by the courts and insisted upon by the 
company, would, in a great majority of cases, enable the com- 
pany to refuse payment of the loss. This is especially appli- 
cable to fire and accident policies. 

QUESTIONS. 

Page 98. — "What is insurance? What is the insurance policy? What is 
life insurance? What is fire insurance? What do fire insurance policies 
usually contain ? How are the terms of insurance policies usually governed ? 

Page 99. — What are some of the usual conditions of fire insurance? 
What are some of the usual conditions of life insurance? 

Page 100. — What effect will fraud or concealment have on an insurance 
policy? What is said regarding representations and warranties? What is 
said regarding accident insurance? What is the most important of the 
matters referred to in the hints? 






LIEN'S. 



A Lien is the right of one person to retain the possession of 
the property of another. The right exists for the purpose of 
satisfying the claim or charge concerning the property. The 
right expires only when the claim or charge is satisfied or paid. 
It cannot be exercised after the person in whose favor it exists, 
has delivered possession of the property to the owner. 

Creation of Liens. — Liens are created in three different 
ways : (1) by law, (2) by usage, (3) by agreement of the par- 
ties. A lien is said to be created by law when it is provided 
for by a statute law or is recognized by the common or mari- 
time law. It arises by usage in case where custom from time 
immemorial has allowed it, and in the third case it may arise 
whenever the parties may agree that it shall exist. It may 
arise by express agreement between the parties, or, if the per- 
son receiving the goods gives notice in advance that he will 
claim a lien, and the owner does not object, the lien arises by 
implied agreement. 

Two Kinds of Liens. — Liens are either general or special. 
A general lien is the right to detain any property of the debtor 
which may come into the creditor's hands, in order to satisfy 
a general balance due on account. Agents and commission 
men have a general lien upon property of their principal, to 
satisfy unpaid commissions arising out of previous transac- 
tions. Special or particular liens exist only as against the 
particular property concerning which the claim or charge 
arises. We have seen that common carriers have a lien for the 
freight upon goods carried. Warehousemen have liens upon 
goods stored, for the storage. Workmen employed to repair or 
perform any service upon an article of personal property, have 
a lien for the amount of their charges. These are special or 

particular liens. 

102 



LIENS. 103 

Requisites of a Lien. — There must be the subject matter 
or the thing upon which the lien is claimed ; it must have law- 
fully come into the possession of the person claiming the lien 
and still he in his possession at the time the lien is claimed ; 
there must be an indebtedness in his favor against the owner. 

Waiver of Lien. — A person who would be lawfully entitled 
to a lien may waive it by expressly agreeing that he will not 
insist upon it ; by neglecting to assert it when he intends to 
rely upon it. If the goods are in the possession of another and 
are demandpd by the owner, and the person having possession 
refuses to deliver them, he must refuse upon the ground that 
he has a lien, otherwise he waives that right. A lien is waived 
also by any new agreement between the parties to the effect 
that the debt shall be paid in some other manner, or, as we 
have seen, by the surrender of the property by the person enti- 
tled to the lien. Liens are enforced according to the manner 
in which they are created. If they are created by statute the 
statute usually provides a method of selling the goods to satisfy 
the lien. Many States have adopted statutes specifying that 
liens, however created, shall be enforced by the sale of the 
goods in a specified manner and the proceeds applied to the 
satisfaction of the lien. 



QUESTIOXS. 

Page 102. — What is a lien? What is its purpose? How long does it 
exist? How are liens created? When is a lien created by law? When 
by usage and when by agreement? Distinguish between general and 
special liens by referring to the illustrations. 

Page 103. — What are the requisites of a lien? What are the two ways 
mentioned w T hereby a lien may be waived? Illustrate them. 



THE PLEDGING OF PERSONAL 
PROPERTY. 



Definition. — It is the delivery of personal property by the 
owner, to a creditor' as security for the payment of a debt, or 
the performance of an agreement. It is somewhat analogous 
to liens, for the reason that the person to whom the property 
is delivered, is said to have a lien on it, or may hold possession 
of it, until the debt is paid, or the agreement performed. 

Delivery of the Property. — The pledging is complete upon 
the actual delivery of the property from the debtor to the cred- 
itor. By actual delivery is meant either a delivery whereby 
the creditor takes manual posession of the property, or con- 
structive delivery, which we have seen is a delivery by turning 
over possession of something that represents the property, as a 
bill of lading, or a freight receipt. It may be the delivery of the 
key to the place where the property is stored. The pledging 
may also be clone by the execution and delivery of a written 
agreement of pledging, called a chattel mortgage. 

The Contract of Pledging". — The agreement between the 
debtor and creditor is to the effect that the debtor shall have a 
certain right of property in the articles pledged, in case the 
debtor fails to pay the debt, or perform the agreement for 
which the goods are delivered as security. It will be seen, 
therefore, that the contract of pledging is a collateral contract. 
It is collateral to the performance of the original contract, 
which is the payment of the debt. If that is not paid, the 
collateral contract may be enforced. 

How Enforced. — Most of the States have enacted statutes, 
prescribing how the creditor shall enforce his rights against 
the property pledged. It is usually provided that the property 
shall be sold in some public manner, upon due notice to the 
owners. The creditor may take the proceeds of the sale to 
satisfy the debt or cover his damages arising from a failure of 

104 



PLEDGIXG OF PERSONAL PROPERTY. 105 

the debtor to perform the agreement. At any time before the 
sale the debtor may redeem his property by satisfying the 
charge for which it was pledged. Pawn brokers are persons 
engaged in the business of receiving articles of personal prop- 
erty as pledges or pawns, for the payment of money loaned or 
advanced by them, to the owners. 

Chattel Mortgages. — In order to constitute a valid pledg- 
ing, there must be an actual delivery of possession of the prop- 
erty pledged, except in case of pledging by mortgage. A 
mortgage of this kind is called a chattel mortgage. All species 
of personal property may be pledged by the execution and 
delivery of a mortgage. The mortgagee, who is the creditor, 
becomes vested with the right to the possession of the property 
if he chooses to assert it, but it may be left in the possession of 
the owner and debtor, providing the mortgage is duly filed 
or recorded in the proper public office. The statutes of each 
State regulating the mortgaging of personal property, usually 
prescribe the. terms and conditions which the mortgage must 
contain and specify when, how and wdiere it must be recorded 
or filed. 

QUESTIONS. 

Page 104. — Define pledging of personal property. To what is it analo- 
gous? How may the delivery be perfected? What is the agreement in- 
volved? What is the principal and what the collateral contract? How is 
the contract of pledging enforced? 

Page 105. — Under what circumstances may the debtor redeem the prop- 
erty? When is an actual delivery of the property unnecessary? What is 
a chattel mortgage? How are such mortgages negotiated? 



INTEREST AND USURY. 



Interest, is a compensation paid for the use of money. In 
early times the law prohibited a person loaning money, from 
receiving or demanding any compensation for its use. In this 
age, interest is everywhere allowed, although the rate is variable. 
In some States the parties may agree upon a rate of interest 
which shall be paid. In such States the rate is said to be un- 
limited. In other States the rate is fixed by law. If money is 
loaned, or if a contract is made for the payment of money, 
with interest, the rate per cent, not being specified, the legal 
rate is always presumed. The parties may agree upon any 
rate of interest less than the legal or highest rate allowed by 
law, in the State where the contract is made. They cannot 
agree to a rate in excess. 

When Interest is Allowed. — It is allowed in three instances: 
(1) Whenever the parties agree that interest shall be payable. 
This is the case usually with all kinds of commercial paper, 
although as we have seen, negotiable paper does not draw in- 
terest unless it is so stated in the writing. (2) Interest is 
allowed upon debts remaining unpaid after maturity. If you 
purchase a bill of goods on thirty days' time, and do not pay at 
the end of thirty days, interest commences to run on the 
amount thereafter. In the case of a running account, interest 
commences from the time a statement of the account is pre- 
sented, and the balance demanded. (3) The third class com- 
prises all instances in which an agreement to pay interest is 
implied. If you purchase the bill of goods on the understand- 
ing that you are to pay cash, instead of having thirty days' 
time, it will be implied that you are to pay interest if you fail 
to keep your agreement, and interest commences on the value 
of the goods, as soon as they are delivered to you. 

Usury, is the taking of illegal interest. All interest is illegal 
which is at a higher rate than allowed by law. Any agreement 

106 



INTEREST AND USURY. 107 

which provides for a higher rate of interest than is allowed by 
law, is said to be a usurious agreement. The result of demand- 
ing or receiving usury, depends upon the statute of the State. 
In some States the creditor forfeits the interest, both the legal 
and the usurious. In other States he forfeits both principal 
and interest. 

Illustration. — If you apply to a money lender for a loan of 
a thousand dollars, and he agrees to loan you the money with 
interest, upon your paying him a bonus of fifty dollars, the 
agreement is usurious. It is an agreement for the payment of 
more than lawful interest. If the transaction occurs in the 
State of New York, for instance, the money lender forfeits the 
thousand dollars as well as the interest upon it. He cannot, 
by law, collect the money. If you give him your note or a 
mortgage for the loan, the paper would be void and could not 
be enforced by him. In other States he might collect the 
principal, that is, the thousand dollars, but could not collect 
any interest upon it. Any subterfuge which is resorted to in 
order to evade the law, renders the agreement as usurious as 
though it were expressly provided that usury should be paid. 

What is Not Usury. — An agreement for the payment of 
usury, made after the principal has been loaned, or the origi- 
nal debt contracted, is not usurious. In other words, the pay- 
ment of usury must be a part of the agreement for the loan. 
Professional money lenders usually avoid the statutes against 
usury by making a contract for the indorsement of negotiable 
paper. For instance, when you apply to the money lender, he 
may in substance say : "I haven't any money of my own to 
loan, but if you will make your promissory note, 1 will indorse 
it, providing you will pay me fifty dollars for my indorsement. 
If I indorse it, I know where you can get it cashed. " Now if 
this is the real agreement, the transaction is not usurious. 
The man loans his name and credit for your accommodation. 
He guarantees your paper, and the law says that he may demand 
and receive any amount whatever, for his indorsement. On 
the other hand, if it is merely a subterfuge to evade the usury 
law, and as a matter of fact, it is his money which is finally 
used to discount the paper, and he is the real lender and creel- 



108 BUSINESS LAW. 

itor, the contract is usurious. The business is so conducted, 
however, that it is difficult for the borrower to prove the sub- 
terfuge, and the contract will ordinarily be upheld. It is not 
usurious to buy negotiable paper, or bonds and mortgages, after 
they have been made and delivered, although they are pur- 
chased for much less than their face value. 

Interest Upon Interest, or compound interest, is not law- 
ful, providing the agreement to pay it is made in advance. 
After interest is due, however, if a person owing it agrees to 
pay interest upon it, such interest upon interest can be collected. 
In some States the interest laws are such, that an agreement 
to pay interest upon past due interest will be presumed, and no 
express contract is necessary in order to collect it. 

The Result of Usury. — We have seen that in some States 
the making of a usurious agreement prevents the lender from 
collecting any interest whatever, either the lawful or the unlaw- 
ful, while in other States the lender loses both principal and in- 
terest. Ordinarily one of these results happens, but there are a 
few States in which the only result is the loss of all interest 
above the lawful rate. The general rule is, moreover, that the 
borrower can recover from the lender all moneys which may 
have been paid above the lawful rate, and all securities given 
for a usurious debt are void. 

Conflict of Laws. — By referring back to the chapter on 
Contracts, page 22, we see that according to the law of place 
a contract lawful in the State where it is made, and to be per- 
formed there, is lawful everywhere, but if a contract is to be 
performed in another State, it must also stand the test of the 
laws of that other State. An agreement, therefore, to pay 
interest, must be for the payment of the lawful interest in the 
State where the agreement is to be performed. 



QUESTIONS. 

Page 1 06 . —What is interest ? When is interest allowed ? What is usury ? 
Page 107. — Give an illustration? What agreements are not usurious? 
Page 108. — What is the rule regarding compound interest ? What is 
the result of usury? How does the law of place apply to usury. 



MASTER AOT3 SERVANT. 



The Parties. — It can almost be said with truth, that nearly 
every person, at some time in life, is either a master or a serv- 
ant. These are the terms used in law. In ordinary business 
language, the master is called the employer, and the servant 
the employee. Both parties must be of full age. An infant is 
not bound by a contract to perform services. An infant may 
recover m a suit at law, whatever the services performed are 
worth, although greater than the price for which he has agreed 
to work. The parents of an infant are entitled to his wages. 
Unless the parents have given him his time, they can collect 
his wages although payment has been made to the infant himself. 

The Nature of the Contract. — It is an agreement by a 
servant to perform general or particular service for the master, 
for a compensation called wages. If the servant is engaged for 
some specified and particular duties which are agreed upon at 
the time of employment, he cannot be compelled to perform 
different duties or more difficult labor in another department. 
On the other hand, if the contract of employment is general in 
its nature, the employee is bound to labor in any particular . 
line which the employer may direct, excepting that he cannot 
he compelled to devote his time to extra hazardous and danger- 
ous occupations, not contemplated at the time of the employ- 
ment. If the employment is to be for more than one year, or 
is not to be completed within one year from the time it is 
made, it must be in writing, otherwise it may be oral. 

The Compensation. — If it is not expressly agreed upon at 
the time the employee enters into the service, he may collect 
the reasonable value of the services. This value is generally 
ascertained and fixed by the usual price of like services at the 
time and place of the employment. In any employment re- 
quiring skilled services, the time, study and expense which the 
employee has been put to, in acquiring the necessary skill, is 

109 



110 BUSINESS LAW. 

taken into consideration. When one performs services for an- 
other, it is presumed that compensation is to be paid. Except- 
ing in case of such services as men constantly render one 
another, and are always considered gratuitous, nothing short of 
the agreement of the servant that he is to work without com- 
pensation, will prevent him from collecting the reasonable 
value of the service performed. 

The Duration of the Employment. — If the time of service 
is not fixed by the agreement of the parties at the time the 
employment is entered into, it is discretionary with either. 
Either may end the term at any time. The employer may 
discharge the employee at any time for habitual neglect of duty, 
incompetency, wilful disobedience or immoral conduct. 

The Servant's Obligations. — If the employee offers himself 
for professional employment, or an employment requiring skill, 
he undertakes: (1) that he possesses that reasonable degree of 
learning and skill ordinarily possessed by those engaging in 
that employment ; and (2) that he will use reasonable and ordi- 
nary care in the exercise of that skill. For a failure in these 
undertakings he is liable. If the employment is for a stated 
time, the employee is bound to serve for such time, excepting 
in case of sickness or physical incapacity, arising without his 
fault. If he wilfully abandons the employment before the 
expiration of the term, he cannot collect compensation. In 
no case can the employee collect compensation where the con- 
tract of employment is entire, unless he can show that he has 
fully performed it. That is to say if he leaves the employment 
without cause before the expiration of the term, he loses the 
wages for the time already served. 

The Employer's Obligations. — The employer is bound to 
provide the employee with labor for the full time agreed upon. 
The fact that his business turns out unprofitable, or that he 
chooses to discontinue it, or that he has no work for the em- 
ployee to do, will not relieve him from paying the compensation, 
although the employee remains idle. If he by persecution or 
other act, prevents the employee from laboring, he is equally 
liable to pay compensation. He is also bound to employ com- 
petent fellow servants, and to furnish proper and safe tools and 



MASTER AXD SERVANT. Ill 

appliances, for the employee's use. He is not liable, however, 
for an injury happening to an employee through the negligence 
or carelessness of a fellow employee. He is bound to treat the 
employee humanely, and in case the employee leaves the em- 
ployment for cause, such as inhumane treatment, subjection to 
perils and dangers not ordinarily incident to the employment, 
or the performance of labor on Sunday or extra labor under com- 
pulsion, the employer is equally bound to pay the compensation, 
as though he discharged the employee without cause. 

The Servant's Risks. — It has just been stated that the 
employer is not liable if the employee is injured by the care- 
lessness of a co-employee. That is one of the risks the employee 
assumes. Moreover, the employee takes all risk of dangers 
which are ordinarily connected with and incident to the 
employment. The employer is bound however to instruct the 
employee in the use of dangerous machinery and appliances 
and to point out dangers which are not obvious and known to 
the employee. Having done this and having employed com- 
petent fellow employees and furnished suitable and safe ma- 
chinery and tools, he throws upon the employee the known 
risks of the employment. 

Illustration. — AYe will suppose that you are entering the 
employ of a quarry-man, wdiere a large part of the work con- 
sists in blasting with dangerous explosives. In the first place, 
if you are not acquainted with the nature of the business, it is 
the duty of the employer to instruct you regarding the work. 
He must point out to you the dangers incident to the business, 
and the proper manner of avoiding them. He must show you 
how to use the tools and appliances. In the second place, it is 
his duty to furnish you a proper equipment for the work, such 
as proper and suitable drills, instruments for tamping the 
charges, suitable and proper explosive compounds and proper 
fuses and appliances for exploding the blasts. In the third 
place, it is his duty to see that the employees whom he puts to 
work with you, are possessed of the requisite skill, and are 
reasonably competent for the business in hand. These are his 
chief duties. If he has performed them, and you are injured, 
you suffer the loss, because you assume the well known dangers 



112 BUSINESS LAW. 

which are incident to the business, at the time you enter upon 
the employment. If one of your fellow employees negligently 
or prematurely explodes a blast, and you are injured, your 
employer is not liable. This rule applies to all occupations or 
employments, whether dangerous or harmless. 

Employee's Liability. — The employee is free from liability 
for his acts during the employment when the circumstances 
are such that an agent would be free. Indeed the rules laid 
down governing principal and agent, apply in general to em- 
ployer and employee. The employee is not generally liable 
upon a contract made by him on account of the employer, 
except he falsely represents that he is authorized to make the 
contract, or is otherwise guilty of fraud or deceit. 

Employer's Rights Against Third Persons. — The em- 
ployer being entitled to the services of the employee, has a 
right of action against any one injuring the employee. He can 
sue for an assault committed upon the employee, or for the 
bite of a vicious dog. In all such cases his right of action 
grows out of his loss of his employee's service. The employer 
can sue another for enticing his employee away, or for harbor- 
ing his employee in case the employee has improperly quitted 
the service. If the employee earns anything, in service per- 
formed at a time when he should properly be attending to his 
employer's business, the employer is entitled to the earnings. 

The Employer's Liability for the Acts of the Em- 
ployee. — The employer is bound by all the acts of the employee, 
which are performed in the due course of the service for which 
the employee is hired. The extent of the employee's authority 
to bind the employer, is exactly measured by the scope and 
purpose of the employment. The employer is ordinarily liable 
for the wrong, deceitful, or fraudulent acts of the employee, 
performed in the due course of the employment. For anything 
done beyond the purpose of the employment and not in fur- 
therance of it, the employee alone is liable. It is a common 
matter for employers to be held responsible for the negligence 
of their employees. By negligence is meant any neglect of the 
employee to do all that he ought to do in the full and faithful 
performance of his duty. The employee may be the most 



MASTER AND SERVANT. 113 

skillful for the business that can be procured, but in case of 
his fault or neglect the employer is liable. Common instances 
of the enforcement of this rule are in suits and claims against 
railway corporations for injuries resulting from carelessness of 
employees. 

QUESTIONS. 

Page 109. — Who may be parties to the contract between master and 
servant? What is the nature of the contract? When must it be in writing? 
How is the compensation fixed? 

Page 110. — How is the duration of the employment fixed? When may 
the employer discharge the employee? What are the servant's obligations? 
When is the employee not entitled to compensation? What are the em- 
ployer's obligations toward the employee? 

Page 111. — What are the servant's risks and under what circumstances 
does he assume them? Give the illustration. 

Page 112.— What is said regarding the employee's liability? What are 
the employer's rights against third persons? What is the employer's lia- 
bility to third persons? 



HUSBAND AXD "WIFE. 



Marriage is a contract, called the contract of marriage. The 
formalities attending the execution of the contract, depend 
largely upon the statute laws which each State has enacted 
regarding it. It must ordinarily be entered into in a formal 
manner, which is the marriage ceremony. In some States the 
rule is that in case persons live together, and introduce each 
other as husband and wife, a contract of marriage will be pre- 
sumed, although there has been no formal and express agreement 
entered into by a marriage ceremony or otherwise. 

Divorce is the annulment or dissolution of the marriage 
contract. It is only possible when authorized by a statute law. 
The grounds upon which a divorce will be granted are pre- 
scribed by statute. Divorce is either partial or absolute. In 
case of partial divorce, the husband and wife are merely sepa- 
rated, and the wife is entitled to support by the husband. 
Neither can contract another marriage. In case of absolute 
divorce, their relations are wholly dissolved, and the party for 
whose wrong doing the divorce is decreed, cannot marry again. 
The innocent party is free to contract a second marriage. 

The Law of Place, which has been already discussed, is 
again applicable here. Marriage being a contract, if it is valid 
and lawful, according to the laws of the State where it is made, 
it is valid everywhere. It is possible, therefore, for persons 
who cannot contract a legal marriage in one State, to go to 
another State and enter into a legal marriage. This unfortu- 
nate condition of the law is likely to continue until all the 
States have enacted uniform marriage and divorce laws. 

Duties and Liabilities of the Husband. — The husband is 
bound to furnish a suitable support to the wife, considering 
his means and her station in life. In case of his neglect to do 
so, she may contract for such necessaries as are proper for her, 
and bind her husband by the contract. She may do so while 

114 



HUSBAND AND WIFE. 115 

they are living together, or, in case she has been obliged to 
leave her husband by reason of improper treatment, or other 
just cause. If a wife leave her husband without just cause, he 
is not liable for debts of her contracting. It is frequently cus- 
tomary for a husband whose wife has left him without just 
cause, to advertise the fact in a public way so that others may 
not trust her on the strength of his credit. 

Rights of tlie Husband. — In return for his duties and lia- 
bilities concerning his wife, the husband is entitled to her 
services. He has a right of action for personal injuries which* 
render her incompetent to perform service. So strict is the 
husband's right to the wife's services, that he cannot make a 
valid agreement to pay her compensation for the performance 
of a wife's ordinary duties. In some States the statutes have 
gone so far in empowering the wife to contract in her own 
name, that an agreement by the husband to pay a wife for 
services might be valid as between themselves, but rarely would 
it be valid as to the husband's creditors. Creditors may always 
insist that money paid by the husband to the wife for her ser- 
vices, shall be refunded, and applied toward the satisfaction 
of their debts. 

Disabilities of the Wife. — Eef erence has already been made 
(page 9) to the wife's incompetency to contract. This disa- 
bility has been removed by statute law in nearly all of the 
States, and very frequently a w^ife may now make contracts as 
freely as her husband. The same course of legislation has also 
largely freed the husband from his liability, which existed under 
the common law, to pay debts which his wife had contracted 
before marriage, and also his liability to pay damages caused 
by her wilful and wrongful act, such as slander or assault. 

Duties of Parents to Children. — Parents are bound to pro- 
tect, educate, aud maintain their children. They must educate 
and support the children in a manner befitting the station in 
life in which the family move. We have already seen that in 
case of the failure of the parents to support the child, the lat- 
ter may purchase such necessaries as are proper, and bind the 
parents. This does not apply if the child leaves its home 
without just cause. 



116 BUSINESS LAW. 

The Rights of Parents. — The parents are entitled to the 
earnings of the child. Parents are also entitled to obedience 
from the child, and may inflict chastisement for disobedience. 
The law as administered in the United States, vests in the 
courts large discretion regarding the custody of children. It 
may be given either to the father or mother, in case of their 
disagreement. By the common law the father always had a 
paramount right to. the custody of the children. According 
to the statute law of most States, children are bound to sup- 
port aged and indigent parents, providing the childrens' means 
are sufficient. This provision is in order to prevent the bur- 
den from falling on the public at large. 

Orphan Children. — By the statute law, provision has been 
made for the management of the persons and property of orphan 
children. It is accomplished by the appointment of guardians 
by Orphans' Courts, or other courts having jurisdiction. Guar- 
dians are sometimes appointed to manage the property of in- 
fants who are not orphans. Such appointments of guardians 
are usually made in case an infant becomes possessed of prop- 
erty before attaining majority. The infant over whom a guar- 
dian is appointed is called a ward. 

Selection of Guardian. — In case it becomes necessary to 
appoint a guardian for an infant, the nearest relative who is 
proper and competent, or will be most likely to look after the 
interests of the ward, is selected and appointed by the court. 
By the statutes of some States it is provided that in case the 
appointment is to be made for an infant above a specified age, 
frequently fourteen, the infant himself may nominate the guar- 
dian of his choice, although the court is not bound to approve 
of such selection. 

QUESTIONS. 

Page 114. — What is said regarding the formalities necessary for the 
contract of marriage ? What is divorce ? What is the law of place as 
applied to marriage ? What are the husband's liabilities ? 

Page 115. — What are the husband's rights? What are the parents' 
duties ? 

Page 116.— What are the parents' rights ? What provision is made for 
orphan children ? How are guardians selected ? 



TELEGRAPH A.~NT) TELEPHONE 
COMPANIES. 



The Xatnre of the Business. — The business of maintain- 
ing and operating telegraph and telephone lines, is ordinarily 
in the hands of companies or corporations, and therefore the 
treatment of the subject is placed under that head. The busi- 
ness may be conducted, however, by private individuals. In 
such case the rules here given are equally applicable as where 
it is conducted by corporations. Those engaging in it, whether 
corporations or individuals, hold themselves out to the world 
as ready and willing to receive and deliver messages. They 
are allied to common carriers and are sometimes, although 
erroneously, called such. Their liability to receive and deliver 
all messages offered, is somewhat similar to the liability of a 
common carrier to receive and carry goods. They may plead 
war, pestilence, flood, or act of God, as an excuse for refusing 
to receive messages, or for delay in delivery. In case of tele- 
phone lines, this obligation to receive applies only to instances 
in which transmitters and receivers, or the telephones, are 
under the control, and in the custody of the company. The 
company is under no liability to a subscriber who rents a tele- 
phone, excepting such as it agrees to assume in the contract of 
renting. This agreement is usually nothing more than to keep 
the line in reasonable working order and connect one subscriber 
with another, whenever demanded. 

The Contract Undertaken. — The contract which a com- 
pany engaged in this business enters into, is with any person 
from whom it receives a message to be delivered for a compen- 
sation. The contract is not ordinarily expressed. If you take 
a message to the company's office, and hand it over to the per- 
son in charge, and it is received, although not a word should 
be said, a well defined contract is made. It is that the company 
will deliver that message to the person to whom it is addressed 

117 



118 BUSINESS LAW. 

with reasonable diligence and will deliver it correctly. The 
compensation may be demanded in advance, or the company 
may consent to collect it of the person to whom the message is 
to b'e delivered. The compensation if not fixed by agreement 
or by statute law must be a reasonable compensation. In many 
States the amount which companies can charge for delivering 
messages is fixed by statutes. 

Liability of the Company. — The company is liable for any 
error in the transmission of the message, such as the substitu- 
tion of a wrong word, or the omission or misspelling of a word. 
For instance, if you telegraph a Chicago merchant to "ship 
two car loads of wheat immediately/' the nature of the mes- 
sage is enough to indicate to the company that it is important 
that the message should be delivered without delay. If there 
is an unreasonable delay in the delivery of the message, or if 
the message when delivered reads "one car load" instead of 
"two", and before the correct information is finally received 
by the Chicago merchant, the price of wheat has advanced, 
you have a right of action for your loss. The amount which 
a company is liable to pay for mistake or omission is limited to 
the actual damage received by the sender of the message, or 
the person to whom it is to be delivered. 

To Whom the Company is Liable. — We have seen by the 
illustration in the last paragraph, that the liability of the 
company can be enforced by the person who sends the message. 
It may also be enforced by the person to whom the message is 
addressed. The person to whom it is to be delivered has a 
right of action for mistake in transmission, or for delay or 
failure to deliver, in all cases where he suffers special damages. 

Other Instances of Liability. — The company's liability 
extends not only to errors in the wording of the message itself, 
but also to a failure to deliver it within a reasonable time, and 
without unreasonable delay. Likewise it is liable for a delivery 
to a wrong person. Moreover, the business is presumed to be 
conducted in a confidential manner, and the contents of messages 
must not be revealed. If servants or employees do reveal the 
nature of messages, and injury results to either the sender or the 
person to whom they are to be delivered, the company is liable. 



TELEGRAPH AXD TELEPHONE COMPANIES. 119 

Limitations of Liability. — A telegraph or telephone com- 
pany does not insure the delivery of a message just as a common 
carrier insures the delivery of goods. Its liability arises only 
in case of its negligence or the negligence of its employees. It 
may limit and restrict its liability by any reasonable rules and 
regulations which it may adopt. It has a right to stipulate 
with any customer, for instance, that it shall not be liable for 
mistakes or delays in case of unrepeated messages, except for 
the actual amount jiaid for the transmission. Message blanks 
have usually printed upon them certain stipulations limiting 
the responsibility of the company. The sender who uses one 
of these blanks will ordinarily be bound by the printed condi- 
tions and stipulations, especially if he has been in the habit of 
using them, and has previously noticed the printed matter. 
But it is held that the usual provisions printed on the blanks 
limiting the liability of the company, do not apply, and will 
not be binding in case of error arising from gross negligence. 

QUESTIONS. 

Page 117. — What is the business undertaken by telegraph and telephone 
companies ? Is there any excuse for refusing to receive messages ? What 
is the contract undertaken ? How is the compensation fixed ? 

Page 118. — What is the company's liability ? Give an illustration. To 
whom is the company liable ? 

Page 119.— What are the limitations of the liability ? 



PATENTS, COPYRIGHTS AND TRADE- 
MARKS. 



Patents. — Patents are documents issued by the United 
States, through the Patent Office, signed and sealed by the 
Commissioner of Patents. Their effect is to give to the person 
to whom they are issued, the exclusive ownership, use and 
control of the invention described in the document. The in- 
vention is said to be patented. 

"What is Patentable. — Several conditions must exist to 
entitle an applicant to a patent. The inventor must have dis- 
covered something new and useful in art, machinery, manu- 
facture, or composition of matter, or some new and useful 
improvement thereof. The invention or discovery for which 
the patent is claimed, cannot be anything known or used by 
others in this country. It cannot be anything described in 
any printed publication, in this or any foreign country, prior 
to the inventor's discovery ; it cannot be anything which has 
been in public use, or on sale for more than two years prior to 
the application, unless the discovery has been abandoned. 

Copyrights. — They differ from patents because they apply 
only to something a person has written or drawn. The prin- 
cipal is the same, in that the copyright gives to a person the 
exclusive right to make copies of what he has written or drawn, 
just as a patent gives to the inventor the exclusive right to 
manufacture and use what he has invented. Copyrights are 
granted by the United States upon proper application as in the 
case of patents. 

Trade Marks. — The term is frequently used in two senses. 
It may be used in a sense as referring to a sign or device, which 
manufacturers of an article stamp upon their goods and labels, 
in order to give the goods a distinctive feature. In the second 
place it may also refer to the exclusive right which the manu- 
facturers have to use that sign or device. In the latter sense 
a trade mark is the right which the United States grants to 

120 



PATENTS, COPYRIGHTS AND TRADEMARKS. 121 

manufacturers or dealers in any article of commerce, to the 
exclusive use of some particular design or device upon their 
goods and manufactures. In the former sense it is the design 
or device itself. 

How Obtained. — Patents are obtained by application to the 
Commissioner of Patents, at the Patent Office in AVashington. 
The application is accompanied by a formula of priority of 
invention, and a model or drawing of the invention. Copy- 
rights are obtained by simply filing copies of the literary work 
or drawing in the office of the Librarian of Congress. There is 
but little formality required. Before publication the author 
must deposit a printed copy of the title of his work with the 
Librarian of Congress at Washington. In case it is a drawing 
or engraving, a description must be deposited. The title page 
of a literary work is usually deposited. After publication two 
copies of the completed work must be deposited. A trade 
mark, or more particularly the right to use it, is obtained by 
registering the device or design at the Patent Office. 

Their Object. — The purpose for which the government 
grants these rights is to encourage discovery, manufacture, and 
literary activity, by protecting the inventor, manufacturer or 
author in the use of the product of his brain. He alone has 
the right to reproduce the thing, and it therefore assumes a 
commercial value. 

. To Whom Granted. — Patents and trademarks may be 
granted to citizens of foreign countries, as well as to citizens of 
the United States, and in most foreign countries, citizens of the 
United States may apply for patents. Copyrights are not so 
free. Efforts have been made to induce Congress to pass an 
International Copyright Law, whereby the citizens of all nations 
may protect the work of their brain, and a statute in further- 
ance of those efforts has been enacted, although it does not 
make copyrights as free as authors desire. 

Their Duration. — A patent runs for seventeen years, except 
that a patent for a design is confined to the term of fourteen 
years. The original term of copyright is twenty-eight years, 
with the privilege of renewing for a further term of fourteen 
years, making forty-two years in all. 



122 BUSINESS LAW. 

Transfer of the Right. — The purpose of patents and copy- 
rights being to encourage authors and inventors by giving to 
their products a commercial value, it naturally follows that the 
law provides a method for the sale of the patent or copyright 
itself. The author is not restricted to the sale of copies of the 
articles protected. The transfer of the patent or copyright is 
made by written assignment, and in case of the sale of a patent 
the assignment, or bill of sale, as it might be called, is filed in 
the Patent Office. 

Infringement, is the violation of the exclusive rights of the 
patentee, author, or owner of a trade mark. These persons 
having the exclusive right to make and sell copies of the thing 
protected, or the exclusive right to use the trade mark; any 
one who makes, uses or sells the thing protected, is guilty of 
infringement, and may be sued for infringement. It will be 
seen that the person who uses the protected article without 
right is as guilty as the person who makes or sells it. 

Validity. — A patent, copyright, or trade mark may be 
granted by the government and yet not be valid. The govern- 
ment officers or examiners, for instance, might not discover 
the fact that the article had been published or in common use 
prior to the application, and therefore not entitled to pro- 
tection. If the fact is not discovered, the patent, copyright 
or trademark may be issued and it will remain valid until its 
validity is attacked, and it is proved to be invalid. Any one 
sued for infringement may show as a defense, that the thing 
was not originally entitled to protection ; in case of a patent 
that it was not new or patentable ; in case of a copyright that 
it had been previously published, and was not the work of the 
author's brain. 

Protection Marks. — The law requires that an article pro- 
tected by patent, copyright or trade mark shall bear a stamp 
upon it, — words indicating the fact. In order to claim the 
rights under the patent, every article before it is sold, must be 
marked " patented." Books and prints must be marked "copy- 
righted," while the words "trade mark "are placed upon a 
device used for that purpose. In case of a patent, the law 
authorizes the use and sale of the article before the patent has 



PATENTS, COPYRIGHTS AND TRADEMARKS, 123 

been actually issued, providing an application for the patent 
has been made. In case the article is put on sale before the 
patent has been issued it must be marked, "patent applied for." 
The statutes of the United States impose a penalty for using 
these words without authority. 



QUESTIONS. 

Page 120. — What are patents ? When is an invention patentable ? What 
are copyrights ? What are trade marks ? 

Page 121. — How are patents obtained ? How are copyrights obtained ? 
What is the object of them ? To whom are they granted ? What is 
their duration ? 

Page 122. — How may the rights be transferred ? What is an infringe- 
ment ? What is said about the validity of patents, copyrights and trade 
marks ? What are protection marks ? 



LANDED PROPERTY. 



Distinguished from Personal Property. — Referring back 
to the definition of personal property, (page 55), we see that it 
includes all moveable things which the owner may take with 
him from place to place. Landed property, or as it is more 
frequently called, real estate or real property, is immoveable* 
It is incapable of being transferred by the owner from the place 
of its location. It includes everything which is attached to the 
earth. It may be attached to the earth naturally, like trees or 
water upon the surface, or oil, coal and minerals beneath the 
surface. It may be attached to the earth artificially by the hand 
of man, as houses, walls or other structures. The owner of a 
piece of land owns everything on it, everything in the sky above 
it, and everything beneath it. He is said to own indefinitely 
upwards and downwards to the center of the earth. 

Interest in Real Property. — There are several interests 
which a man may have in real property : (1) He may be the 
absolute owner. In such case he is called the owner of the fee, 
or an owner in fee simple. He may will it to anyone, and if 
he owns it at the time of his death, and leaves no will, his 
heirs will be entitled to it. (2) He may be the owner for life; 
he is then called a life tenant, and is said to possess a life estate. 
He cannot give an absolute and perpetual title to it by deed as 
in case of an owner of the fee. He can sell the use of it during 
his life time. At his death his interest as well as the interest 
of anyone to whom he may sell, ceases. (3) A man may own a 
contingent interest in real property. The person who will be 
entitled to property at the death of another person who has a 
life interest, is said to have a contingent interest or estate in 
it. He may sell and convey such interest, but the sale does not 
take effect so as to give possession, until the death of the ten- 
ant for life. (4) A man may have an interest in real property 
by way of easement, as it is called. If he has a right of way 
over another man's land, or a right to use another man's land 

124 



LAXDED PROPERTY. 125 



for any purpose, he has «h easement. (5) A man may have 
an interest in real property by lease. He is then called a tenant 
for years. His interest expires at the termination of his lease. 

Widow's Dower, is the interest of a wife in her husband's 
real property. That interest attaches to any real property which 
the husband owns at the time of the marriage, or which he 
may acquire at any time during the marriage. The wife can- 
not lose that interest in any way except by her own act of sign- 
ing a deed. The husband cannot cut her interest off by will. 
At his death she is entitled to the use of one-third of all such 
real property. A popular misapprehension sometimes exists 
in regard to a wife's " third." It is frequently understood 
that the widow has an absolute title to her one-third, whereas 
she has only the use of it during her life time. At her death 
it descends to her husband's heirs. 

A Widower's Interest, in real property left by his wife is 
greater than a widow's interest. He is entitled to the use, 
during his life time, of all the real estate which she owns at 
the time of her death. He is not entitled to any interest what- 
ever unless a living child was born of the marriage. It is 
immaterial whether any children are living at the time of the 
wife's death. At the death of the widower the property de- 
scends to the wife's heirs. A number of the States have enacted 
statutes entirely abolishing the widower's interest -in his de- 
ceased wife's property, and likewise some States have enacted 
statutes enlarging or diminishing the widow's right of dower. 

Acquisition of Real Property. — There are two ways by 
which a man may acquire title to real property. The chief 
and most important way is by deed, or as it is sometimes called, 
by grant. The other way is by long continued use and occu- 
pation, or as it is called in law, by "prescription." A man's 
interest in real estate is frequently referred to as his title, and 
it is said that title to real estate is acquired in the two ways 
just mentioned. In case title is acquired by prescription, the 
law presumes that a deed was once given, and therefore the law 
"books usually say that title to real estate can only be acquired 
by deed. It is better for our purposes, however, to consider the 
acquisition of title under the two heads of prescription and deed. 



126 BUSINESS LAW. 

TITLE BY PRESCRIPTION. 

Distinguished From Title by Deed. — Title by prescrip- 
tion, or use and occupation, is not so common as title by deed. 
As a method of acquiring an individual ownership in land, it 
is perhaps earlier than the method of acquiring land by deed. 
Long before men knew how to read and write, individuals were 
wont to take possession of a patch of soil, enclose it and culti- 
vate it, and thus acquire a right to keep others off. For this 
reason it may be best to discuss title by prescription before title 
by deed. In case of title by deed, the man who claims to own 
real property has a deed or other writing to prove his title. 
It is a " paper title." In case of title by use and occupation the 
owner has no paper to show as evidence of his title. 

How Acquired. — Title by prescription is acquired by the 
uninterrupted, undisputed and peaceable possession and occu- 
pation of real estate for twenty years. That is the period fixed 
by the statutes of nearly all the States. In a very few in- 
stances the period is longer or shorter by a year or two. 

Popular Fallacies. — It is a matter of common knowledge 
that a man acquires an ownership in land by twenty years pos- 
session. Laymen, however, frequently misunderstand the 
conditions attending the acquisition of title to land in this 
way. In order to ripen into a title we have seen that this pos- 
session and occupation must be, (1) uninterrupted. It must 
be continuous, without break for the twenty years. (2) It 
must be undisputed and peaceable, that is, a man's possession 
and occupation of the property must be without protest or ob- 
jection of others who claim title. (3) It follows that the pos- 
session must be with the assent and knowledge of all the persons 
who may have rights in the property. (4) It must be open 
and visible and well known to others. 

Illustration. — As the question of title by use and occupation 
frequently arises in regard to line fences, Ave will take a case of 
that kind for an illustration. We will suppose that the line 
fence between your land and your neighbor's land has been 
standing for twenty years or more, and therefore you claim to 
own all of the land on your side of the fence. Your neighbor 
claims that the fence is not on the line but encloses some of his 



LANDED PROPERTY. 127 

land which is not included in your deed. In order to make 
good your right to the land, you must show that the fence has 
stood there continuously for twenty years or more ; that you 
have used and occupied all the land up to the fence ; that you 
have done so with your neighbor's knowledge and without pro- 
test or objection on his part, and that he knew during these 
years what his rights were, and did nothing to dispossess you. 
In other words, in order to lose his rights, he must have known 
what they were, and " slept on them," as the law says. If he 
has objected, or protested, or disputed your right to possession, 
by taking any active measures to enforce his own claims, he 
does not forfeit them, and you do not acquire title by use and 
occupation. It is seen, therefore, that title is not acquired by 
prescription, in the direct, broad and easy manner which peo- 
ple frequently suppose. 

Easements, are interests in land, rather than ownership of 
the land itself. 

Instances of Easements, are : (1) Eight of way. This is 
a right which the owner of one piece of land may have to pasa 
over the land of another. It is in the nature of a lane or pri- 
vate road. It may be the right to pass over another man's 
land at a certain place, or it may be a right to pass over it at 
any place. It may be authorized in order to reach a highway, 
a well or spring, or another piece of land belonging to the owner 
of the right of way. (2) A right to draw water by pipe or 
conduit from a spring or well on another man's land. (3) 
A right to divert the water of a flowing stream or brook. 
(4) A right to overflow a stream or brook by building a dam. 
Easements are acquired both by deed and by prescription. They 
are very frequently acquired by prescription. 

TITLE BY DEED. 

A Deed is a contract in writing conveying real estate. It 
is one of the most solemn forms of contract. It is not merely 
a promise to convey land, it is the conveyance itself. It not 
only conveys the land, but it is also the evidence of the OAvner's 
title. It is absolutely necessary for a conveyance of land, while 



128 BUSINESS LAW. 

a bill of sale is not a necessity in a sale of personal property, 
because personal property is capable of manual delivery. 

The Parties. — There may be any number of parties to a 
deed. There must be at least one seller and one purchaser. The 
seller is usually referred to as the first party, and is called the 
grantor. There may be any number of grantors. The pur- 
chaser is referred to as the second party, and is called the 
grantee. There may also be any number of grantees. The 
grantors must always be parties competent to contract. Grantees 
maybe incompetent persons, that is to say, land may be deeded 
to an infant or a lunatic, and the grantee will get good title to 
it. The infant or lunatic, however, not being able to give a 
deed or sell land, there must be some method by which it can 
be conveyed, and therefore the power to convey it, is vested in 
the courts. In case it is desired to sell real estate owned by an 
incompetent person, a petition is presented to the proper court, 
and, if it appears to the court that the interests of the incom- 
petent person will be promoted by a sale, the court will appoint 
a suitable person, usually called a special guardian, to make the 
sale, and will empower the guardian to sign a deed in the name 
of the infant, idiot or lunatic. 

Form of Deeds. — In the United States it is seldom that a 
deed is required to be in any particular form of words, although 
deeds must ordinarily be executed in a formal manner. They 
must always contain the requisites or elements of a deed. 

The Requisites of a Deed Are : (1) Names of the parties; 
(2) the consideration ; (3) words of conveyance ; (4) descrip- 
tion of the property : (5) words denoting that the grantee is 
to have it. 

Usual Form. — We have seen that no precise form is neces- 
sary, so long as the requisites just mentioned are present. The 
statutes of several States even do away with the necessity of 
some of these requisites. The names of the parties should be 
inserted in full. The consideration should be expressed in 
words and also in figures. The words of conveyance usually 
employed are "grant and convey;" the description should be 
accurate, and should definitely locate the property by stating 
the name of the town, county and State, and boundaries, or 



LANDED PROPERTY. 129 

reference to maps, so that a stranger by reading the deed could 
find the property. The fifth requisite mentioned is sometimes 
omitted. The words "to have and to hold unto second party, 
his heirs or assigns forever, 7 ' are usually employed. It is called 
the "habendum clause." 

Covenants. — This term is usually applicable to any other 
words or recitals contained in the deed in addition to the req- 
uisites which have been mentioned. Covenants are additional 
promises or agreements on the part of either the grantor or the 
grantee, or both. They usually limit or restrict the convey- 
ance, the title, or the use which may be made of the land. 
If the deed recites that the premises are " free of incumbrances," 
it is a covenant on the part of the grantor that there are no 
incumbrances. If the deed recites that no malt or spirituous 
liquor shall be kept or sold for profit on the premises, it is a 
covenant on the part of the grantee that the land shall not be 
used for such purposes. Covenants may be either personal or 
they may run with the land. Personal covenants bind simply 
the parties to the deed. They are avoided by another sale of 
the land or the death of the party bound. Covenants running 
with the land, are binding forever. They bind the parties and 
also all persons who may ever afterwards own the land. 

Kinds of Deeds. — Deeds are usually classified as : (1) War- 
ranty deeds ; (2) warranty deeds with full covenant ; (3) quit 
claim deeds ; and (4) deeds with covenant against grantor. 
The first kind, or the ordinary warranty deed, is the most 
common form in use. In an ordinary warranty deed the 
grantor warrants the title as against any one lawfully claiming 
the same. It becomes a full covenant deed by adding the fur- 
ther covenant that the grantor has a good and clear title to the 
premises. In some localities it is quite the custom for grant- 
ors to give full covenant deeds. In other localities they are 
given only in case the grantee has doubts about the perf ectness 
of the title, or demands it for other reasons of safety. Quit 
claim deeds are usually given in cases where the grantor has 
not a perfect title, or does not wish to vouch for or warrant it. 

Effect of an Ordinary Warranty Deed. — We have seen 
that a warranty is not a necessary requisite of a deed. The 



130 BUSINESS LAW. 

deed is valid without it. It is an additional recital, and is a 
covenant. It is a covenant of title, and it is important for 
every person who owns, or expects to own real estate, to under- 
stand the difference between an ordinary warranty deed and a 
full covenant deed. In an ordinary warranty deed the cove- 
nant is usually in this form : " And the party of the first part 
covenants and agrees to and with the party of the second part, 
that the premises thus conveyed, in the quiet and peaceful 
possession of the said party of the second part, his heirs and 
assigns, he will forever warrant and defend against any person 
whomsoever lawfully claiming the same, or any part thereof." 
These words are usually inserted at the end of the deed follow- 
ing the description of the property. The deed in which they 
are used is a warranty deed, because the grantor or seller war- 
rants the title to be good, in so far that he will defend it against 
any one making a lawful claim to the property. But just here 
there is a prevalent misunderstanding. The grantor is not 
liable upon his warranty and he cannot be held accountable for 
any defects in the title which afterward appear, until the 
grantee has been dispossessed of the premises by some one hav- 
ing a better title. Eeal estate owners frequently suppose, that 
because they have a warranty deed, the man who gave it is 
bound to defend them against other claimants to the property, 
or of any interest in it. The illustration which will follow 
will more clearly point out the distinction. 

Ordinary Form of Warranty Deed. — Following is an or- 
dinary form of warranty deed : 

WARRANTY DEED. 

$ut$ ji§ttti#tttttt#> made this first day of June, in the year 
of our Lord one thousand eight hundred and ninety-one, ^ttXCt t\X 
David H. Evans of the City of Rochester and State of New York, 
unmarried, of tlie first part, and Moses F. Hamm of the same place, 
of the second part, Wit\Xt$$tt\x, That the said party of the first part, 
in consideration of the sum of Six Thousand Dollars to him duly 
paid at or before the delivery hereof, has bargained and sold, and by 
these presents does grant and convey to the said party of the sec- 
ond part, his heirs and assigns forever, %\\ that tract or parcel 



LANDED PROPERTY. 131 

of land situate in the City of Rochester, County of Monroe and 

State of New York, Tcnown and described as lot number ten (10) 
in the Magnolia tract, reference being had to a map of said tract 
on file in Monroe County cleric's office, with the appurtenances, 
and all the estate, right, title and interest of the said party of 
the first part therein. §Vttd the said party of the first part, does 
hereby covenant and agree to and with the said party of the sec- 
ond part, his heirs and assigns, that he will Warrant and QtfttlH 
the said premises in the quiet and peaceable possession of the said 
party of the second part, his heirs and assigns forever, against 
any person whomsoever lawfully claiming the same or any part 
thereof. 

$n Witness Whereof, the said party of the first part, has 
hereunto set his hand and seed the day and year first above 
written. 

DAVID H. EYAXS (Seal). 

Sealed and delivered in the presence of 
C. P. Vary, 
Brackett H. Clark. 

£tate of iw f 0tfe, ) 
County of Moxroe, > ss. 
City of Rochester. ) 

On the first day of June, in the year one thousand eight hun- 
dred and ninety-one, before me personally came David H. Evans, 
to me personally known to be the indivi clued described in, and who 
executed the foregoing instrument, and he acknowledged that he 
executed the same. 

JOHN F. KINNEY, 

Notary Public. 

If the grantor Evans were married, his wife's name would be 
inserted as one of the first parties and she would sign and ac- 
knowledge the deed. 

Effect of a Full Covenant Deed. — The full covenant deed 
contains not only the covenant or warranty referred to in the 
last paragraph, but also a further covenant in words something 
like this : "The said first party covenants and agrees to and 
with the second party, his heirs and assigns, that, at the time 



132 BUSINESS LAW. 

of the ensealing and delivery of these presents, he is the lawful 
owner, and is well seized of the premises above conveyed, free 
and clear from all incumbrances. " These words are usually 
inserted in the same part of the deed, and connected with the 
covenant of the ordinary warranty deed. No precise form of 
words is necessary, so long as the words express the intention 
of the grantor to make a covenant, that he has a good title to 
the premises, and that they are free from incumbrances. The 
effect is that if his title is not good, but is in any way defective, 
or if any other person has any interest, any right, claim or 
incumbrance upon the premises, he can be held accountable as 
soon as he delivers the deed. The grantee need not wait until 
he has been put off the property at the end of a law suit. 

Illustration. — We will suppose that you have purchased a 
piece of land, and after the deed has been executed and deliv- 
ered to you, the owner of the adjoining property lays claim to 
a portion of it, on the ground that the division fence is not on 
the boundary line. If your deed is an ordinary warranty deed 
you cannot go to the man from whom you purchased, and say, 
" You did not give me a good title to all the property. My 
neighbor claims a part of it and has commenced a suit to recover 
what he claims. You must defend this suit for me, because 
you have given me a warranty deed." He is not bound to 
defend the suit, or to protect you against the claim of the 
neighbor. There is no obligation resting upon him to do any- 
thing for you until the neighbor has lawfully recovered possession 
of the property claimed, by due legal proceedings, or by some 
process which the law recognizes'as valid, On the other hand, 
if your grantor has given you a full covenant warranty deed he 
is bound to defend you and protect you against all claims, or pay 
you damages immediately upon delivery of the deed, or when- 
ever it is discovered that any other person has any claim upon 
the land or any part of it. You need not wait to sue him until 
such other person has succeeded in his claim. This rule applies 
to all cases of defective title ; to a claim of ownership of a part 
of the land ; to a claim of dower right, or an undivided interest 
in it, or to a claim of lien or incumbrance upon it, providing 
the claim is a lawful one. 



LAXDED PROPERTY. 133 

Effect of Quit Claim Deeds. — The quit claim deed con- 
tains no covenant of title whatever. It has simply the bare 
requisites of a deed. The grantor does not even represent that 
he has any title. It conveys the land subject to all defects in 
title or incumbrances. It has been said that the quit claim 
deed is in common use in cases where the grantor does not wish 
to vouch for his title. It is also used as between heirs to prop- 
erty, in conveying to each other or to third persons, their 
respective interests. It is also used where the grantor has no 
real or actual interest in the property, but the grantee requires 
the deed in order to perfect his title, as in case of a former 
deed which has been lost before being recorded. 

Form of Quit Claim Deed. — Following is an ordinary 
form of a quit claim deed: 

QUIT CLAIM DEED. 



Wafo $ ttfatuw, 



Made this First day of June, in the year of our Lord one thous- 
and eight hundred and ninety-one, ^ttXCttti Elijah D. Webster 
and Ellen J/., his wife, of the City and County of New York of 
the first part and George F. Yeoman of the same place of the 
second part, yX\i\\t$$tt\\> That the said parties of the first part, 
in consideration of the sum of One Dollar, to them in hand paid 
by the said party of the second part, the receipt ivhereof is hereby 
confessed and acknoivledged, have bargained, sold, remised and 
(ljuitdaimat, and ^y t\xt$t 1§,Xt$txA# do bargain, sell, remise 
and Quitclaim unto the said party of the second part and to his 
heirs and assigns forever, %\\ that Start 0* %%XU\ fit |Cand 
situate in the City and County of New York, and State of New 
York, knoicn and described as the west half of lot nine (9) in 
section A of Harlem Heights, so called, being eighteen feet front 
on the northerly side of 160th street and running back of the same 
width 100 feet, Together with all and singular the hereditaments 
and appurtenajices thereto belonging or in anywise appertaining, 
and the reversion and reversions, remainder and remainders, 
rents, issues and profits thereof, and all the estate, right, title, 
interest, claim and demand whatsoever, of the said party of the 



134 BUSINESS LAW. 

first part, either in law or equity, of, in and to the above bar- 
gained premises, with the said hereditaments and appurtenances, 
®0 l^XXt M& tfl U0M the said described lands to the said party 
of the second part, his heirs and assigns, to the sole and only 
proper benefit and behoof of the said party of the second part, his 
heirs and assigns forever. 

|ftt WitttJe^ XC\xtXtof f the said parties of the first part to these 
presents have hereunto set their hands and seals the day and 
year first above written. 
In the presence of 
Hakry K. Elstxw, 
James Vick. 

ELIJAH D. WEBSTER [seal.] 
ELLEN" M. WEBSTER. [seal.] 



City and County of^New Yoek. [ ss * 

On this first day of June, in the year Eighteen hundred and 
ninety one, before me, the subscriber, personally appeared at said 
City of New York, Elijah D. Webster and Ellen M., his ivife, 
of the City and County of New York, State of New York, to me 
personcdly known to be the same persons described in and who exe- 
cuted the foregoing instrument, and they severally acknoivledged 
to me that they executed the same. 

JOHN D. LYNN, 

Notary Public. 

Effect of Covenant Against Grantor. — This is the fourth 
kind specified in the division of deeds. It is better than a quit 
claim deed and yet does not contain a general covenant of title 
as in case of warranty deeds. It contains a covenant on the 
part of the grantor that he has not himself done, or permitted 
anything to be done injuriously affecting the title. By insert- 
ing it he represents that the title is good so far as anything he 
has done is concerned. 

Execution of Deeds. — The execution of a deed is the act of 
signing it by the grantor or grantors. In many States the 
execution must be in the presence of, and must be signed by, 
two witnesses. Whether witnesses are required or not, their 
presence and signatures can do no harm. In all cases there 



LANDED PROPERTY, 135 

must be seals opposite the signatures of the grantors. In many 
States a scroll made with the pen will answer for a seal. The 
grantee need not sign the deed. By accepting it and paying 
the consideration he becomes bound by it. If there are cove- 
nants and agreements in it, which are to be kept or performed 
by him, the acceptance of the deed obligates him to keep and 
perform them. 

Delivery of Deeds. — A deed may be dated and executed a 
long time prior to its delivery. Until delivered it has no force 
or effect. Courts are frequently called upon to decide what 
constitutes a delivery, and to say when a deed has been deliv- 
ered. A deed may be delivered to the grantee himself, or to 
liis agent. It may be delivered by the grantor or by his agent. 
Moreover, it may be in the hands of the grantee or his agent 
for some time and yet not be delivered, because not accepted, 
or because the consideration has not been paid. The delivery 
is governed by the intention of the parties. There can be no 
delivery until the grantor or his duly authorized agent has 
passed it over with the intention that it shall take effect, beyond 
recall, and it is accepted with like intent. 

Delivery in Escrow, is the delivery of a deed to a third 
person, with instructions and power to deliver it to the grantee 
when some act has been performed or event taken place. The 
grantor cannot recall the deed from the third person, nor is the 
grantee entitled to it until the conditions under which it is held 
by the third person have been complied with. 

Proof or Acknowledgment of Deeds. — A deed is binding 
upon the person who signs it as soon as it is executed and deliv- 
ered. An acknowledgment of it is not necessary to its validity. 
Acknowledgment is only necessary in order to entitle it to be 
recorded in the public office where deeds are recorded. An 
acknowledgment is the formal admission by the grantor before 
an officer empowered to take acknowledgments, to the effect 
that the grantor executed it, and that it is his deed. Acknowl- 
edgments are usually made before a justice of the peace, notary 
public, or commissioner of deeds. In some States the officer 
taking the acknowledgment is obliged to examine the grantor's 
wife separately from the husband, in order to ascertain whether 



136 BUSINESS LAW. 

she executed the deed of her own free will. In some States a 
deed may be " proved" by the affidavit of a witness who saw it 
signed, so as to entitle it to record. 

Recording' of Deeds. — The practice of recording deeds or 
other real estate conveyances is of comparatively modern origin. 
It is wholly regulated by statutes. Such statutes are frequently 
referred to as the recording acts. A deed is not invalid be- 
cause not recorded, unless the statute says it must be recorded. 
The statutes are usually permissive. They allow the holders to 
record their deeds if desired. As between the grantor and the 
grantee, excepting in States where recording is required, a 
deed is perfectly valid whether recorded or not. The prime 
object of recording is to give notice to third persons of the 
change of title and to make the conveyance valid as to third 
parties. The practical advantage of recording arises in case a 
deed or conveyance is lost. A copy, certified by the officer 
with whom it is recorded is as good evidence of title as the 
original. 

Illustration. — If you purchase a piece of property in a State 
where the statute does not compel you to record your deed, 
you may conclude not to record it, but instead file it away in a 
safe place. As against your grantor, your title to the land is 
good. If he were dishonest, however, he might sell the land 
again, or mortgage it, to a third person, without knowledge of 
your interest. If such person purchases in good faith without 
knowledge that you hold a deed, and should record his deed or 
mortgage before you record your deed, he would have a better 
title than you. Your grantor, it is true, might commit a crime, 
but he could cheat you out of your property. The better prac- 
tice is to record all deeds or real estate conveyances, as soon as 
delivered. If the conveyance is recorded all persons are pre- 
sumed to know of it. 

Abstracts of Title, or "searches" as they are frequently 
called, are written documents showing the conveyances which 
have been made of a piece of land, during a specified period. 
They show also what, if any, incumbrances there are on the 
property by way of mortgage, judgment, or otherwise. If 
there is a deed which some careless owner has failed to record, 



LANDED PROPERTY. 137 

there is said to be a break in the chain of title, and the ab- 
stract will show that also, as well as any defects arising from 
the failure of persons having an interest in the property to 
execute deeds. Abstracts of title are made either by the pub- 
lic officer having charge of the office in which deeds are re- 
corded, or by title abstract, or title insurance companies. The 
compensation is frequently fixed by statute. In these days it 
is quite customary for the purchaser of property to demand an 
abstract of title and for the purchaser to give it. 

MORTGAGES. 

Their Xature. — A mortgage is a conveyance of land to a 
creditor as security for the payment of a debt. Upon the pay- 
ment of the debt, the conveyance becomes void. It is the 
pledging of land for the payment of a debt. The debtor, or 
person who gives the mortgage, is called the mortgagor. The 
creditor, or person to whom the mortgage is given, is called 
the mortgagee. What has been said regarding the parties to a 
deed is equally true as to the parties to a mortgage. 

The Defeasance. — An ordinary mortgage is in the form of 
an ordinary deed. It contains the usual requisites of a deed. 
It appears on its face to be an absolute conveyance of the prop- 
erty, with the exception that it contains a clause stating the 
terms of payment and a defeasance. It is called the defeasance 
clause. It is a recital that the conveyance shall be void, if the 
money, for the payment of which the mortgage is given, is 
paid according to the terms specified. It is sometimes provided 
by statute that a conveyance intended to operate as a mortgage, 
shall be void unless the defeasance clause is incorporated in the 
mortgage or recorded with it. This is intended to reach grasp- 
ing creditors, who demand a deed of property as security for a 
debt, thereby vesting the title in them, and perhaps making it 
difficult for the debtor to secure restitution. The courts how- 
ever hold that a conveyance given as a security, is a mortgage 
even though it appears on its face to be an absolute deed. 

Power of Sale and Redemption. — Mortgages usually con- 
tain a clause empowering the mortgagee to sell the property 
according to law, and out of the proceeds to pay the debt and 



138 BUSINESS LAW. 

costs. At any time before the sale the grantor or his repre- 
sentatives, haye the power of redeeming the property by pay- 
ing the debt with interest and costs, if any. For that reason 
the grantor's interest in land on which he has given a mort- 
gage, is called the equity of redemption. A sale of mortgaged 
property to satisfy a mortgage must be conducted according to 
the statutes which are provided for such cases. It is called the 
foreclosure of the mortgage. In some States the mortgagor is 
allowed by statute a specified time after a sale in which to re- 
deem. In other States a sale cuts off his interest entirely. 

Execution and Delivery. — "What has been said relative to 
the execution and delivery of deeds applies to the execution 
and delivery of mortgages. The rules relating to the acknowl- 
edgment and recording of deeds are also applicable to the 
acknowledgment and recording of mortgages. 

Usual Form of a Mortgage. — The following is an ordinary 
form of a mortgage : 

MORTGAGE. 



TO* §ttfatuw, 



Made this First day of June, in the year of our Lord one thou- 
sand eight hundred and niiiety -one, ^jttXCttti Martin Hunkley and 
Kittle Hunkley, his wife, of the City and County of New York, of 
the first part, and Halton Davis, of the Town of Brighton, -N. Y. , 
of the second part, W\\ftt$Hi\x f That the said parties of the first 
part, in consideration of the sum of One Thousand Dollars 
($1000), part purchase price of the premises hereinafter de- 
scribed, to them duly paid, the receipt whereof Is hereby acknowl- 
edged have sold, and ^y \\\t$t ££f *#£ttt£, do grant and convey to 
the said party of the second part, his heirs and assigns, §Ut that 
Start tst ^ZXttl jotf gCatttl, situate in .the Town of Brighton, 
County of Monroe and State of New York, and being part of 
Toivn lot 35, bounded southerly by Highland Avenue, easterly 
and westerly by the easterly and westerly lines of said lot So, 
and northerly by a line parallel with Highland Avenue, and so 
far distant northerly as to contain three acres of land. ®hi# 
(Bxmxt is Intended as a security for the payment of the sum of 
One Thousand Dollars of principal, payable $100 on the first 



LANDED PROPERTY. 139 

day of January next, and $50 quarterly thereafter until said 
principal is fully paid with interest from the date hereof at the 
rate of six per cent, per annum, payable semi-annually on all sums 
remaining unpaid cd the times of payment, according to the con- 
ditions of a y\on& this day executed and delivered by the said 
Martin Hunkley to the said party of the second part. And in 
case default shall be made in the payment of the principal sum 
hereby intended to be secured, or in the payment of the interest 
thereon, or any part of such principal or interest, as above pro- 
vided, or of the taxes, assessments or insurance hereinafter men- 
tioned, it shall be lawful for the party of the second part, Ms 
executors, administrators, or assigns, at any time thereafter, to 
sell the premises hereby granted, or any part thereof, in the man- 
ner prescribed by law, and out of cdl moneys arising from such 
sale, to retain the amount then due for principal, interest, taxes, 
assessments, or insurance, together with the costs and charges of 
■making such sale, and the overplus, if any there be, shall be paid 
by the party making such sale, on demand, to the said Martin 
Hunkley, his heirs and assigns. And this conveyance shall be 
void if full payment of the aforesaid moneys, both principal and 
interest, be made as hereinbefore specified, and if the aforesaid 
covenants and each of them be well and truly kept and performed 
as hereinbefore specified and provided. 

y\\X W$i\\tt$$ WShtXttfff The parties of the first part, have here- 
unto set their hands and seals the day and year first above written. 

Sealed and delivered in the presence of 
Geo. C. Joxes, 
S. B. McNall. 

MARTIN" HUNKLEY. [seal.] 
KITTLE HUNKLEY. [seat,] 

£tate 0< lent $arh t ) 

City axd Couxty of New York. ) " 

On this first day of June, in the year one thousand eight hun- 
dred and ninety-one, before me, the subscriber, personcdly appeared 
Martin Hunkley and Kittie Hunkley, his wife, to me personcdly 
known to be the same persons described in and who executed the 
within instrument, and they severally acknowledged that they 
executed the same. GEO. C. JONES, 

Notary Public. 



140 BUSINESS LAW. 

The above mortgage is called a purchase money mortgage,, 
because it is given to secure part of the purchase price of the 
land. It is not necessary for the wife to sign a purchase money 
mortgage, although the execution of it by her, can do no harm. 

Additional Clauses. — We have seen that the requisites of a- 
mortgage are substantially the same as those of a deed, except- 
ing as to the defeasance and power of sale clauses, and the 
statement of the terms of payment. There are three additional 
clauses which are sometimes inserted, however : (1) The inter- 
est clause, (2) the insurance clause, and (3) the tax clause. 
(1) The interest clause provides that if the interest is not paid 
when due, the entire mortgage debt shall become due, although 
by the terms specified in the mortgage the principal might not 
become due until long afterwards. (2) The insurance clause 
provides that the mortgagor shall keep the property insured 
and assign the insurance policy to the mortgagee, and if he 
fails to do this the mortgagee may effect the insurance and add 
the premium paid to the amount of the mortgage. (3) The 
tax clause provides that the mortgagor shall pay the taxes 
promptly, and if he fails to do so, the mortgagee may pay them,, 
and add the sums paid to the amount secured by the mortgage. 

Bonds or Notes. — It is customary for the grantor at the 
time of executing the mortgage to execute either a bond or a 
note of the same amount, to go with the mortgage. The bond 
or note represents the debt, and strictly speaking, the mortgage 
is given to secure the payment of the bond or note. The 
mortgagee may sue on the bond or note to collect his debt, or 
he may elect to foreclose the mortgage against the land. A 
bond, following an ancient form, is always made for twice the 
amount of the debt. That is called the penal sum or penalty. 

Form of the Bond. — Following is the form of the bond 
going with the above mortgage : 

BOND. 

§>tuw alt §ta toj tee §vtmt$: 

That we, Martin Hunkley and Kittie Hunkley, of the City of 
Neiu York, are held and firmly hound unto Halton Davis of the 
Town of Brighton, N. Y. , in the sum of Two Thousand Dollars, 



LAXDED PROPERTY. 141 

io he paid to the said Davis or to liis certain attorney, executors, 
administrators or assigns, <£,ot ivhidt payment well and truly 
io be made we bind ourselves and oar heirs, executors or admin- 
istrators, jointly and severally, firmly by these presents. 

£tnU& with our seals and dated the first day of June in the year 
of our Lord one thousand eight hundred and ninety-one. 
£he (Condition of this* ©bUgattott i£ Jhtdt, That if the above 
bouiiden Martin Hunkley and Kittle Hunkley, their heirs, exec- 
iitors and administrators, or any of them, shall and do well and 
truly pay or cause to be paid unto the above mentioned Halt on 
Davis, his certain attorney, executors, administrators or assigns, 
the just and full sum of One Thousand Dollars of principal as 
follows : $100 on the first day of January next and $50 quar- 
terly thereafter until said principal is fully paid, with interest 
from the date hereof at the rate of six per cent per annum, paya- 
ble semi-annually, on all sums remaining unpaid at the time of 
payment, then this obligation to be void, otherwise to remain in 
full force and virtue. 

Ktt 3l£ittte0$ W&httwt, TJie parties of the first part havehereunto 
set their hands and seals the day and year first above written. 

MARTIN HUNKLEY (Seal). 
KITTIE HUNKLEY (Seal). 
Sealed and delivered in the presence af 
Geo. C. Joxes, 
S. E. McNall. 

£iate of $Uur Uotfe, ) ^ 

City axd Couxty op New York, j 

On this first day of June, in the year one thousand eight hun- 
dred and ninety-one, before me, the subscriber, personally appeared 
Martin Hunkley and Kittie Hunkley, to me perso?ially knoivn 
to be the same persons described in and who executed the forego- 
ing instrument and they severally acknowledged that they exe- 
cuted the same. 

GEORGE C. JONES, 

Notary Public. 

Assignment of Mortgages. — Mortgages are personal prop- 
erty. Their sale may be effected by a manual delivery by the 
seller to the purchaser. An actual delivery of possession will 



142 BUSINESS LAW. 

vest the ownership in the purchaser. In order, however, that 
the purchaser may get a record title to a mortgage, there must 
be a written assignment, executed, acknowledged and delivered, 
with the same formality as the mortgage itself. The purchaser 
may then record his assignment, and thus give notice to all 
persons of his rights. 

Priority of Mortgages. — The owner of land may give any 
number of mortgages upon it. Their priority, or the order in 
which they are a lien upon the land, and in which they may 
be enforced, depends upon the time they are recorded relative 
to each other. A mortgage first recorded in point of. time is a 
first mortgage. A mortgage next recorded is a second mortgage, 
and so on. It is important, therefore, for a mortgagee to 
record his mortgage immediately upon its delivery to him, 
The owner of the land may execute another mortgage., without 
committing a wrong, which may become the first mortgage 
by being first recorded, although not executed and delivered 
until after the other. 

Discharge of Mortgages, — When a mortgage is paid it 
may be delivered up to the mortgagor together with the bond 
or note accompanying it, and it is thenceforth void. But the 
act of surrendering it, will not discharge it on the record, pro- 
vided it has been recorded. It still appears to be a lien upon 
the land. The statutes usually provide for a certificate of dis- 
charge to be executed, acknowledged and delivered to the 
mortgagor by the mortgagee, or the person who is at the time 
the owner of it, providing it has been assigned. The owner of 
the mortgage thereby certifies that the mortgage has been paid 
and satisfied. The mortgagor may record this certificate, or 
discharge of mortgage, as it is usually called, and thereupon 
the mortgage is discharged of record. 

Form of Discharge. — A discharge of the mortgage given 
as a form would be as follows ; 

DISCHARGE OF MORTGAGE, 

7, Halton Davis, hereby certify that a certain mortgage given 
by Martin Ilunkley and wife, dated June 1st, 1891, to me to 
secure $1000, and recorded in the office of the Register of Deeds 



LANDED PROPERTY. 143 

of the City and County of Xeiv York, in Liber, Jf.50 of mortgages, 
at page 55, on the 2nd day of June, 1891, is paid, satisfied and 
discharged. 

HALTON DAVIS (Seal). 
In the presence of 
Geo. G. Joe"es, 
S. R. McNall. 
This certificate of discharge is acknowledged the same as the 
mortgage, 

QUESTIONS. 

Page 124. —Distinguish real property from personal property? State 
the five kinds of interests in real property ? 

Page 125, —What is a dower ? What is a widower's interest in prop- 
erty left by his wife ? What are the two ways specified of acquiring title 
to real property ? 

Page 126. — Distinguish between title by deed and title by prescription ? 
Give the illustration of the acquisition of title by perscription ? 

Page 127.— What are easements ? Give the instances of easements ? 
What is a deed ? • 

Page 128, — What is said regarding the parties to a deed ? . What are 
the requisities of a deed ? 

Page 129. — What are covenants ? Give the illustrations ? How are 
deeds classified ? 

Page 130- —State the effect of an ordinary warranty deed by referring 
to the illustration ? 

Page 132. —State the effect of a full covenant deed by referring to the 
illustration ? 

Page 133.— What is the efiect of a quit claim deed ? 

Page 134, —What is the effect of a covenant against the grantor ? What 
is said in reference to the execution of deeds ? 

Page 135.— What is said in reference to the delivery of deeds ? What 
is delivery in escrow ? What is the object of acknowledgment ? 

Page 136. —What is the object of recording deeds ? Give the illustra- 
tion ? What are abstracts of title ? 

Page 137, —What is a mortgage ? What is the defeasance ? What is 
the power of sale and redemption : 

Page 140,— What additional clauses are sometimes inserted in mort- 
gages ? What accompanies the mortgage to represent the debt ? 

Page 141, — How may mortgages be assigned ? 

Page 142= — How is the priority of mortgages governed ? How are 
mortgages discharged ? 



CONTRACTS FOE THE SALE OF LAND. 



Agreements Preceding the Deed. — Prior to the execution 
and delivery of a deed of land the parties must necessarily have 
had some negotiations which result in its execution and deliv- 
ery. They must have mutually agreed upon the purchase price, 
and the terms of payment. In other words the owner has 
agreed to sell, and the purchaser has agreed to buy for a speci- 
fied consideration. It is of considerable importance to know 
when and under what circumstances the contract is a valid and 
binding contract. If it is not a valid contract, either the seller 
or purchaser may refuse to complete it at any time, up to the 
very moment of the execution and delivery of the deed, and its 
acceptance by the purchaser. 

Must be in Writing. — The statute of frauds (page 20), 
requires that, "every contract for the sale of lands, or any 
interest in lands," must be in writing, and signed by the parties 
to be bound. It may be said as a general rule, therefore, that 
no agreement to sell or purchase land is valid unless in writing 
and signed. There may be a verbal agreement between the 
parties which meets all the requirements of an ordinary con- 
tract. The parties might be morally bound to complete it, and 
yet there would be no legal obligation. There must be a writ- 
ten contract of sale, or some note or memorandum in writing, 
signed by the parties to be bound. If the seller alone signs it, 
he can only be compelled to complete the sale. Likewise if it 
is signed only by the purchaser, he alone is under legal obliga- 
tion to perform it. 

What is a Sufficient Writing. — The contract need not be 
drawn up as a formal legal document. It is sufficient if the 
writing fairly indicates the intentions of the parties, and is 
precise enough to enable a court to ascertain, (1) the terms of 
the contract, (2) the land to be conveyed, and (3) the price to 
be paid for it. A correspondence by letter, if sufficiently full 
and precise, may amount to a contract. The whole contract, 

144 



CONTRACTS FOR THE SALE OF LAND 145 

however, including all the terms and conditions, must appear 
with sufficient detail as to indicate the intention of the parties 
without the aid of explanation. 

What is an Insufficient Contract. — An informal instru- 
ment quite frequently fails to constitute a sufficient contract 
because of its failure to definitely locate and describe the land. 
A defect of that kind would be quite apt to exist in a corres- 
pondence by letters, as the writers would hardly go to the extent 
of stating a formal description of the land, and it is seldom 
that an informal reference to the land would constitute a suffi- 
cient location and description. It is a common practice for 
purchasers to pay the seller a part of the purchase price upon 
the formation of a verbal agreement without any writing. This 
is frequently done under the mistaken supposition that the 
payment of part of the purchase price binds the sale. It has 
no effect whatever toward binding the sale or forming a valid 
contract. The seller is not bound to complete the sale by ex- 
ecuting and delivering a deed, although he may be compelled 
to return the money he has received. This mistaken supposi- 
tion doubtless arises from the fact that in a sale of personal 
property a part payment of the purchase price, or " earnest 
money," goes to make a valid contract. Neither does the mere 
delivery of a receipt for money by the seller of the land, make 
a valid contract, unless the receipt is drawn with sufficient 
fullness to meet the requirements stated in the last paragraph. 

Exceptions. — There are peculiar circumstances, however, 
under which a verbal agreement to sell land will be sustained. 
For instance, if the party seeking to enforce a verbal contract 
has fully performed it on his part, and it appears that the other 
party designs to perpetrate a fraud, which will be accomplished 
if he is not compelled to keep the contract, a court of equity 
will compel him to keep it. Or, if the circumstances are such 
that the party seeking to enforce a verbal contract would be 
defrauded if it were not enforced, as by his having taken pos- 
session, made improvements, and paid part of the purchase 
price, the contract will quite frequently be upheld. 

Formal Contracts. — It is customary for the parties to a 
contract for the sale of land to execute a formal document 



146 BUSINESS LAW. 

called a land contract. These contracts are intended to bind 
the parties while the deed is being prepared or the title ap- 
proved. The arrangement may be, moreover, that considerable 
time is ta elapse before the deed is to be delivered, and in the 
meantime the purchaser is to pay installments of the purchase 
price. The land is said to be sold on land contract. No pre- 
cise form of words is necessary. An ordinary land contract 
would be something like this : 

LAND CONTRACT. 

Article of agreement, made this first day of June, 1891, be- 
tiveen Frank P. Kelsey, of the city of Detroit, Michigan, owner, 
of the first part, and John A. Barhite of the same place, of the 
second part, 

Witnesseth, That, in consideration of the sum of five thous- 
and dollars {$50000), to be to him duly paid, the first party 
hereby agrees to sell to the party of the second pari, all that tract 
and parcel of land situated in said city and State, known and 
described as block ten in Kelsey' s addition to the city of Detroit, 
reference being had to a map of the said addition, filed in the 
Registers office in said city, for the sum of five thousand dollars 
($5000), ivliich the second party hereby agrees to pay to the first 
party as folloius: One hundred dollars ($100) upon the execu- 
tion and delivery of this agreement, and the balance on or before 
the third day of September next ; and the party of the first part 
upon receiving such payment, at the time, and in the manner 
above mentioned, shall, at his own proper cost and expense, exe- 
cute and deliver to the party of the second part, a good and suffi- 
cient ivarranty deed of said premises, ivith official abstract of 
title, showing said premises free and clear of all incumbrances, 
and free from clouds on the title. 

It is agreed that the stipulations aforesaid, are to apply to, 
and bind the heirs, executors, administrators and assigns of the 
respective parties. 

In witness whereof, the parties have hereunto set their hands 
and seals, in the day, and year, first above written. 

FRANK P. KELSEY (Seal). 
JOHN A. BARIUTE (Seal). 



CONTRACTS FOR THE SALE OF LAXD. 147 

Other Conditions. — If the contract is to be recorded it must 
be witnessed, executed and acknowledged according to the laws 
of the State where it is to be recorded. It may also contain 
any other peculiar terms or conditions which the parties may 
agree upon. The purchaser upon receiving the contract may 
safely make payments upon it. If it is recorded his rights will 
be protected as against the seller or creditors of the seller, or 
as against future incumbrances. His risk lies in the fact that 
the seller may become bankrupt and unable to clear the in- 
cumbrances, if any, which are on the land when the contract 
is executed, or, for any other reason be unable to give good 
title. 

QUESTIONS. 

Page 144. — What agreements must precede a deed ? "What is the result 
if the preceding agreements are not valid ? Why must they be in writ- 
ing ? Who must sign the writing ? What is a sufficient writing ? 

Page 145. — What is an insufficient writing ? What is the usual defect 
in a contract by correspondence ? What is the effect of part payment of 
the purchase price ? What is the effect of a receipt ? When will a mere 
verbal agreement be enforced ? What are formal contracts for the sale of 
land called ? 

Page 147. — What is said regarding the acknowledgment and recording 
of land contracts ? 






LA^DLOKD AOT3 TEWAOT. 



Leases, are grants of the use of real property. They convey, 
for the time or period for which they are given, an interest in real 
estate. The interest conveyed may be designated as the right 
to the exclusive possession of the land leased or granted for the 
time specified in the lease. A lease gives rise to the relations 
of landlord and tenant. 

Tlie Parties. — There must be at least two parties to a lease. 
There must be an owner who leases or rents the land, and who 
is called the landlord or lessor, and there must be the person 
to whom the land is rented, who is called the tenant or lessee. 
There may be any number of lessors or lessees. The landlord, 
or lessor, must be a party competent to contract, although the 
land of an incompetent person may be leased by the guardian 
or by an order of the court. The tenant, or lessee, must also 
be a person competent to contract. The tenant agrees to do 
something, if nothing more than to pay the rent, and therefore 
must be competent to make an agreement. 

Formation of the Contract. — If the lease is for one year 
or less the contract of leasing may be made verbally. In law, a 
verbal contract, in cases where the contract may be made ver- 
bally, is always spoken of as a lease, although there is no writ- 
ing. If a lease is for more than a year, we have seen that in 
compliance with the statute of frauds, it must be in writing. 
There must be a written lease. In some States the statutes 
provide that a lease need not be in writing unless it is for more 
than three years. 

A Verbal Lease. — In case a lease is made verbally, the agree- 
ment must be sufficiently definite to express the intentions of 
the parties, as to the time the land is to be leased, and the rent. 
If the rent is not specified the tenant is bound to pay what is a 
reasonable sum for the use and occupation of the premises. 
If the parties do not expressly agree upon the time of the lease, 

148 



LANDLORD AND TENANT. 149 

or the period for which it is to continue, the law will usually 
presume that it is a lease from year to year. The landlord 
cannot remove the tenant until the expiration of the year. 

Leases in Writing-, do not necessarily require a particular 
form of words. It is sufficient if they indicate the intentions 
of the parties. An ordinary form of lease is something like this: 

LEASE. 

A Lease made and executed June 1, 1891, between Clarence 
H. T. Bly, of the toivn of Southold, New York, of the first part, 
and Epher Whitaker of the same place, of the second party WIT- 
NESSETH : 

In consideration of the rents and covenants herein expressed* 
said party of the first part has demised and leased, and does 
hereby demise and lease to the said party of the second part, all 
that tract and parcel of land situated in said town, known and de- 
scribed as Pine Neck and Old Orchard, consisting of about fifty 
(50) acres of land, more or less, in said toivn of Southold, in 
the county of Suffolk, in the State of Neiv York, with the privi- 
leges and appurtenances, for and during the term of one year 
from the date herein, which term xoill end on the thirty-first day 
of May, 1892. 

And the said party of the second part covenants that he will 
pay to the party of the first part, for the use of the said pre?nises, 
the annual rent of one hundred dollars {$100), to be paid in 
quarterly payments of twenty-five dollars {$25) each, to be paid 
at the Southold Savings Bank in said toivn. 

And, provided the said party of the second part shall fail to 
pay said rent, or any part thereof when it becomes due, it is 
agreed that the said party of the first part may sue for the same, 
or re-enter said premises, or resort to any legal remedy. 

It is agreed that the party of the second part, i?i additio?i to 
said rent reserved, shall pay and discharge the taxes and assess- 
ments levied upon said premises for school or highioay purposes 
during said term. 

The party of the second part covenants that at the expiration 
of said term he will surrender said premises to the party of the 
first part in as good condition as now, necessary wear and dam- 
age by the elements excepted. 



150 BUSINESS LAW. 

Witness the hands and seals of the said parties in duplicate, 
the day and year first above written. 

CLARENCE H. T. BLY (Seal), 
EPHER WHITAKER (Seal). 

Kinds of Tenants. — The word tenant is derived from a 
Latin word tenere, meaning " to hold;" and tenants are divided 
into several classes according to the power or authority under 
which they hold or possess the property. They are (1) Ten- 
ants by sufferance ; (2) Tenants at will ; (3) Tenants from year 
to year ; (4) Tenants for years, and (5) Tenants for life. The 
holding of a tenant, having reference to its manner and author- 
ity, is called the tenancy. 

Tenants by Sufferance. — They are tenants who hold over 
or remain in possession of the land after the expiration of their 
lease. The tenant at sufferance must have originally been in 
possession of the land by right and by lawful lease, although 
his holding possession after the expiration of his lease, is wrong- 
ful. In most States it is provided by statute that a tenant by 
sufferance is entitled to notice to quit or give up possession. 

Tenants at "Will, are persons who lawfully enter into the 
possession of land, but for no definite term or period. They 
are subject to be put off at any time at the will of the landlord, 
and are therefore called tenants at will. The possession is 
always right and lawful, whereas the possession of a tenant by 
sufferance is wrongful.. It is sometimes provided by statute 
that a tenant at will is entitled to notice to quit. Ordinarily 
he can be put off without notice, although he is entitled to the 
crops lie may have planted. 

Tenants From Year to Year, are those who have a lease 
for one year certain, and if they hold over after the expiration 
of the year they have a tenant's rights for another year. They 
are always entitled to notice to quit. It is important for both 
landlords and tenants to understand the result if the tenant 
does not move at the end of his year. By holding over he may 
secure the right to remain another year, or the landlord may 
compel him to pay the rent for another year. 

Tenants for Years, are quite similar to tenants from year 
to year. They are all persons who rent or lease land for some 



LANDLORD AND TENANT. 151 

determinate period, and if the lease is only for half a year, or a 
quarter, or any less time, the lessee is regarded as a tenant for 
years. In any event, if an annual rent is paid, the tenant is a 
tenant from year to year. If no definite time is agreed upon, 
and the rent is not an annual rent, but is to be so much a week, 
month or quarter, the tenant is a tenant for years in law, 
although his tenancy may be weekly, monthly or quarterly. 

Tenants for Life. — Reference has already been made to this 
form of tenancy under the discussion of the interests in land. 
A tenant for life is entitled to the use and occupation of the 
land during his life time. In this connection the tenancy fre- 
quently arises from what is called a life lease. This is a lease 
in writing for the period of the life time of the lessee. He 
may or he may not pay rent. 

The Term of Leases. — In addition to what has already 
been said regarding the duration of leases attention should be 
called to the fact that the statutes sometimes limit the time for 
which leases may be given. In the State of New York, for 
instance, it is provided by the constitution that no lease of 
agricultural land shall be made for a longer period than twelve 
years. 

The Kent, is the compensation paid by the tenant for the 
use of the land and the privilege of occupying it. If the lease, 
whether verbal or written, specifies when and w T here it shall be 
paid it must be paid accordingly. If the lease is by the week, 
month or year, the rent is not due until the end of the week, 
month or year, unless it is expressly agreed that it shall be 
payable in advance. It is payable on the land unless it is ex- 
pressly agreed that it shall be paid elsewhere. The statutes of 
many States provide that if the premises are wholly or partially 
destroyed by fire or otherwise, there shall be an abatement of 
the rent accordingly. Where there is no statute on the sub- 
ject the tenant is bound to pay the rent to the end of the term 
of his lease, although he receives no benefit from the property. 
As already intimated if the parties ha^e never agreed upon the 
rent to be paid, the tenant is bound to pay the reasonable 
rental value of the premises or what they will rent for at the 
time and place. 



152 BUSINESS LAW. 

A Sub-Tenant, is a tenant or lessee holding a lease from a 
prior tenant or lessee. When a lease contains no covenant or 
stipulation against the sub-letting of the premises, a tenant in 
possession under it, may sub-let the whole or a part of the 
premises, to another. The person to whom he sub-lets is a 
sub-tenant. The premises cannot be sub-let to be used for a 
purpose inconsistent with the original lease. A tenant may 
also assign his lease and the assignee is virtually a sub -tenant. 
If the premises are sub-let for a wrongful purpose, or a pur- 
pose inconsistent with the original lease, the landlord may 
restrain the tenant or sub-tenant from using or occupying the 
premises for any other purpose than that originally contem- 
plated. It is customary in cases where the landlord does not 
sanction sub-letting by his tenant, to insert in the lease a 
clause to the effect that no part of the premises shall be sub-let, 
and that the lease shall not be assignable, and further, that the 
lease shall become void if the tenant assigns it or sub-lets. If 
such a condition is not made part of the contract, however, the 
tenant may always sub- let the premises or assign his lease, 
whether the lease is verbal or in writing. 

Conveyance During the Lease. — The landlord may always 
sell or mortgage the premises during the term of the lease, 
unless the contract of leasing contains a condition to the con- 
trary. The conveyance, however, is subject to the tenant's 
rights. A sale cannot effect his right to possession. He holds 
until the expiration of his lease, although the ownership of the 
property has changed. If the property is encumbered by 
mortgage, however, at the time the lease is made, the tenant's 
rights are subject to the mortgage. If the landlord fails to 
pay the mortgage, and it is properly foreclosed, the lease is 
forfeited. The tenant may be put off by the purchaser at the 
mortgage sale. The tenant has a right of action, however, 
against the landlord for damages. 

Removal of the Tenant. — If the tenant fails to pay the 
rent agreed upon, there is a method usually provided by statute 
whereby the landlord can summarily remove him. from the 
premises and annul the lease. If the tenant is entitled to 
notice to quit, that must be given, or the rent must be de- 



LANDLORD AND TENANT, 153 

manded before the landlord can commence proceedings to 
recover possession. It used to be the custom, both in England 
and the United States, to allow the landlord to seize the per- 
sonal property of the tenant which might be on the premises, 
m payment of the rent. This was called distress for rent. It 
is seldom allowed now. 

Notice to Quit. — We have seen that there are circumstances 
under which a tenant in possession of land is entitled to notice » 
to quit before he can be ejected by process of law. The statutes 
frequently define what shall constitute a lawful notice, and 
how it shall be given. It is best to have the notice m writing, 
and to have it so drawn that it requires the tenant to remove 
from the premises within a period corresponding to the period 
of the lease. If the lease is by the week or month, a week's or 
a month's notice is ordinarily required. The following is an 
ordinary form of notice : 

NOTICE TO QUIT. 

To John Doe, tenant / take notice that you are hereby required 
to surrender possession of the premises notv occupied by you at 
JVo. 65, on the southerly side of Magnolia Avenue, in the town of 
Arcadia, and I demand possession of said premises. 

Dated June 1, 1891, Richard Roe, 

Landlord. 

At the expiration of the proper time, after the service of the 
notice, the landlord may commence the proceeding at law to 
remove the tenant. 

Waste, is a permanent injury to the property, committed by 
the tenant, such as the cutting down of growing timber, the 
tearing down of fences, the removal of partition walls in a 
house, or the removal of doors or windows. It is also waste if 
the tenant without committing any act on his part, passively 
allows the fences and buildings to fall down or decay, except- 
ing through natural wear and damage by the elements. If he 
permits the natural condition of the premises to change in 
character, contrary to the dictates of good husbandry, he is 
guilty of waste. A common instance of waste is the occurence 
of fires negligently started by the tenant or his servants. In 



154 BUSINESS LAW. 

case a tenant is guilty of waste, the landlord may sue him for 
damages or resort to the courts for an injunction restraining 
him from a further commission of it. 

Repairs. — Nothing more frequently gives rise to disputes 
between landlords and tenants than the question of repairs. 
There is much popular misapprehension as to the law of repairs. 
When leases are made, the parties seldom go sufficiently into 
< details as to provide by whom, and how, repairs shall be made. 
The general rule is, that the landlord is not bound to make 
repairs unless he expressly agrees to do so at the time the lease 
is made. But the rule does not stop here. If nothing is said 
regarding repairs, and no agreement reached, the tenant is 
usually bound to make ordinary repairs, such as putting up 
fences, or replacing or repairing doors or windows which are 
broken, or become out of repair during the tenancy. As the 
law books say, the tenant is bound to "keep the premises wind 
and water tight." But the tenant is not liable for the ordinary 
and natural wear of the premises. He is not bound to repair 
damages caused by the elements, without his fault. He is not 
bound to renew materials worn through natural decay. He is 
bound to so use the property as to make future repairs unne- 
cessary, as far as possible, but his liability does not extend to 
damages arising from accident. Moreover, a tenant cannot 
stop paying rent so long as he occupies the premises, no matter 
what state of disrepair they are in. He may remove, and 
annul the lease if the premises become untenantable without 
his fault, and by reason of disrepair which he is not bound to 
remedy. Generally, however, so long as he continues in pos- 
session he must pay rent, if the landlord, however, is under 
agreement to make repairs, the tenant can enforce that liability 
by offsetting damages against the rent. If the tenant expressly 
agrees to make repairs, or as it is frequently put in the lease 
"to keep the premises in repair" he is bound to do more than 
in case nothing is said about repairs. If the premises are new 
and in good condition when the lease commences, the tenant 
is then bound to keep them in as good condition, although he 
is not charged with the duty of replacing buildings destroyed 
by the elements. If the premises are old, the tenant is not 



LANDLORD AND TENANT. 155 

necessarily bound to restore them to an improved state, but 
must keep them in substantial repair. It will be seen, there- 
fore, that the liability to repair falls generally on the tenant, 
and that the landlord is bound to do nothing unless he lias 
made his agreement to repair. 

Eviction, is any actual expulsion of the tenant, or disturb- 
ance of his possession during the term of the lease. The ten- 
ant has an absolute and exclusive right to the possession and 
enjoyment of the land. He must not be disturbed in that 
possession. If he is disturbed so as to compel him to abandon 
the premises, it amounts to an eviction. Eviction may, there- 
fore, be actual or constructive. 

Actual Eviction, is the forcible removal of the tenant from 
the premises by the landlord, or by any one acting under the 
landlord's authority. Constructive eviction is the intentional 
disturbance of a tenant's possession by the landlord or by any 
one acting under the landlord's authority, whereby the premises 
become untenantable, or the tenant is compelled to abandon 
them. 

The Result of an Eviction, is to suspend the rent. It 
does not forfeit the rent already due at the time of the evic- 
tion, nor is the rent forfeited if the tenant remains in posses- 
sion in case of constructive eviction. He may off-set his dam- 
ages against the rent, but if he continues- to occupy the prem- 
ises, although he might abandon them on account of the con- 
structive eviction, he must pay the rent. 

QUESTIONS, 

Page 148.— What are leases, and who may be parties to them ? When 
must a lease be in writing. When may it be verbal ? 

Page 150. — What is a tenant by sufferance ? At will ? From year to 
year ? 

Page 151. — What are tenants for years, and for life ? What is rent, 
and how is it payable ? 

Page 152. — What is a sub-tenant, and what is sub-letting ? How may a 
tenant be removed ? 

Page 153.— What is waste ? 

Page 154. — When must a tenant make repairs, and when a landlord ? 

Page 155. — Distinguish between actual and constructiye eviction ? 



FIXTURES. 



Definition. — Fixtures are articles of a personal nature which 
have been affixed to land. Before becoming affixed to the 
land they are personal property. After becoming affixed to 
the land they cannot be removed, but are a part of the land, 
and go with it when it is sold or leased. All articles are fix- 
tures which are so annexed to the land, and connected with it, 
as to be incapable of removal without injury to the land or 
buildings. A pump in a well, a fence, a heating furnace, 
boilers, machinery, chandeliers, gas fixtures, store shelving, are 
common instances of fixtures. 

A Grantee's Fixtures. — A question of what constitutes a 
fixture may arise between a person selling and a person pur- 
chasing land, or it may arise between a landlord and a tenant,. 
The grantee of land is entitled to all the articles which have 
become fixed to it, or to the buildings, so as to be permanently 
and habitually attached. He is entitled to anything which is 
a component part of the land, or which is a part of the build- 
ings, for the purpose for which they are designed, and without 
which they would be imperfect, or incomplete for the use for 
which they are designed. The fact that the articles can be 
removed without injuring the land or buildings is not control- 
ling. A portable furnace in the cellar may be easily removed. 
It may have no permanent attachment to the house, and yet if 
it was put there with the intention of making it a part of the 
house, and without it the house would be incomplete, as if 
there was no other method of heating, the furnace would be a 
fixture, and would go with the house on a sale. If the seller 
of land desires to take away articles of the nature of fixtures, 
the safe and proper course is to have an agreement to that 
effect, and have the right to remove the articles reserved in the 
deed, providing they are not removed prior to its delivery. 

156 






FIXTURES. 157 

A Tenant's Fixtures. — The law is more liberal in allowing 
a tenant to remove articles of the nature of fixtures, which he 
has himself put upon the premises. Of course, he has no right 
to remove anything which was there when he took possession. 
When a tenant makes improvements of a permanent character 
without the knowledge or consent of the landlord, they ordi- 
narily become fixtures which he has no right to remove. If 
the tenant makes improvements, however, with the landlord's 
consent and authority, the presumption is that the tenant is to 
have the benefit of them at the expiration of his term. Locks, 
keys, shutters and doors and other such things put up by the 
tenant for the security of the premises, ordinarily belong to 
the landlord and- must be left in place, if the premises would 
be left in an insecure condition by taking them away. 

The Intention of the Parties, has much to do in deciding 
whether an article is a fixture. For instance, if the owner of 
land, or a tenant, makes an improvement or erection with the 
intention of making it a part and parcel of the land, and of 
permanently employing it in the use of the land or buildings, 
that intention will be operative in causing the erection or im- 
provement to be a fixture. It is quite as material as the manner 
in which the article is fastened. 

Landlord's Fixtures. — All improvements or additions made 
by the tenant during his lease, which the tenant has no right 
to remove, belong to the landlord. Leases of business property 
frequently provide that all improvements or additions made by 
the tenant shall remain on the premises and become the property 
of the landlord. 

QUESTIONS. 

Page 156.— What are fixtures ? What are a grantee's fixtures ? 

Page 157. — What are a tenant's fixtures ? What are landlord's fix- 
tures ? How does the intention of the parties affect the question of 
fixtures ? 



NUISANCE. 



Definition. — A nuisance is anything that annoys or incom- 
modes a person in the enjoyment of life and property. Every 
man is entitled to enjoy life, and enjoy the use of his property 
without any unlawful restraint or inconvenience. Every man 
is entitled to light, to pure air, to pure water, to freedom from 
unusual and unnecessary noise. Anything which infringes 
upon these rights is a nuisance. 

Using One's Own Property. — It follows that a man cannot 
use his own property so as to unreasonably injure the property 
of his neighbor by rendering it less habitable and enjoyable. 
lie cannot conduct any business on his own property which 
creates unusual smoke, or noisome smells, or unusual noises. 

Instances of Nuisance are forges or noisy workshops, soap 
factories, dye houses, lime-kilns, tanneries, hog-stys, cesspools, 
the construction of a cornice or water spout so as to cast an 
unnatural quantity of rainwater into a neighbor's building or 
on his land, the corruption of a brook or water course by de- 
positing foul substances in it. The only condition is that these 
things result in a permanent, substantial and material damage 
and injury to the use and enjoyment of the adjoining property, 
or the enjoyment of life there. 

Nice Sensibilities. — Every disagreeable noise or annoyance 
does not constitute a nuisance. The wellfare of mankind de- 
mands that certain kinds of business shall be prosecuted, 
although productive of some annoyance. The question, there- 
fore, is not whether the thing is an annoyance to people of 
extraordinarily fine sensibilities, but does it materially disturb 
the quiet and repose, or substantially interfere with the com- 
fortable enjoyment of the neighboring premises by people of 
ordinary tastes and sensibilities. 

Substantial Damage. — The thing complained of must be a 
substantial injury to the enjoyment of life and property. For 

158 



NUISANCE. 159 

instance, the inhabitants of a great city must expect to suffer 
the consequences which come from the ordinary bustle and 
noise incident to ordinary business pursuits, conducted in an 
ordinary and usual manner. Such things become nuisances 
when they are conducted in such an extraordinary manner as 
to render life physically uncomfortable, or materially injure 
property. Smoke from a factory may be a nuisance if unusual 
quantities of soot are deposited on the adjoining property, or 
the health of the occupants materially affected. 

Public and Private Nuisances. — If the nuisance is injuri- 
ous to a large number of people, to a neighborhood or commu- 
nity, it is a public nuisance, and may be repressed by the public 
authorities, although any one especially injured may do so. A 
thing which injures only a particular piece of property, or in- 
terferes with the material enjoyment of life there, is a private 
nuisance. 

Remedies. — The person who authorizes or maintains a pub- 
lic nuisance may be indicted and punished as for a crime, or 
any person who is especially injured by it may have an action 
for damages, or injunction to restrain its further maintenance. 
In case of a private nuisance there is always an action for dam- 
ages, or for restraining it, by the individual injured. 



QUESTIONS. 

Page 158. — What is a nuisance ? How must a man use his own prop- 
erty ? Give some of the instances of nuisance. To what extent must 
the enjoyment of life and property be affected in order to constitute a 
nuisance ? 

Page 159. — Distinguish between public and private nuisances. What 
are the remedies against a nuisance ? 



HIGHWAYS. 



Definition. — A highway is any thoroughfare used by the 
public generally, whether it be a carriage-way, a horse-way, a 
footway or a navigable river. It is not a private way used by 
one or two persons for particular purposes and on which only 
certain persons have the right to pass. As the old English 
books say, it is a thoroughfare "common to all the king's sub- 
jects." It is used by any one and every one who may have 
occasion to pass over it. 

Establishing of Highways. — Highways are usually estab- 
lished (1) by deed, (2) by dedication, (3) by prescription, (4) 
or by being opened and laid out according to statute. 

Highways by Deed. — The owner of land who is willing to 
have a highway over it, whether for the benefit which will arise 
to himself, or from the desire to accommodate the public, may 
execute a deed of the land, to the city, town or village in which 
it is located, to be used for the purpose of a public highway. 
The city, town or village is the grantee. If the grantee accepts 
the deed, the land thenceforth becomes a public highway, for the 
use of the public at large, and the grantee, which as we have seen 
is a kind of corporation, owns the soil for the use of the public. 

By Dedication. — A dedication of land for the purpose of a 
highway is a voluntary donation by the owner of the land fol- 
lowed by an acceptance on the part of the public. A dedication 
differs from a deed in that it need not be in writing. More- 
over, in case of a deed of land for a highway, the grantee secures 
the ownership of the soil. In case of a dedication, the soil 
remains the property of the owner. He simply donates the 
right to use it for the purposes of a highway. If the owner of 
a tract of land cuts it up into lots and streets, and causes a 
map, showing the lots and streets, to be filed in the usual pub- 
lic office, he thereby dedicates that portion of the tract laid out 
on the map as streets. The act of the owner in filing the map 

160 



HIGHWAYS. 161* 

must be followed by an acceptance on the part of the public. 
The public must signify its acceptance by using the street. If 
the acceptance does not follow, and the street is not used or 
worked for a reasonable length of time, a dedication does not 
result, and the owner may enclose it, and thereby recall or re- 
voke the dedication. An owner of land may dedicate land for 
a highway, by himself laying it out, grading it and enclosing 
it with boundary fences, or by any act of his whereby he evinces 
a willingness to dedicate it to the public use. 

Highways by Prescription. — Under the discussion of title 
to real estate it was stated that a man might acquire title by 
twenty years use and occupation. It is called title by prescrip- 
tion. In the same way the public may acquire a right of thor- 
oughfare by long continued use of land for highway purposes. 
The land so used in time becomes a public highway. The 
owner of the soil cannot close it or obstruct it. If an owner of 
land does not wish to have a highway established upon it, he 
must not acquiesce in its use by the public. He must take 
active measures and means to prevent the public passing upon 
and crossing it, otherwise after a lapse of time, usually twenty 
years, it will be presumed that he has dedicated it and he will 
then be unable to enclose it. 

Highways Laid Out by Statute. — In nearly every State 
there is a statute for the laying out of highways. It is pro- 
vided that if a highway is needed at any particular point the 
officers charged with the duty may have a jury of the inhabit- 
ants summoned. If the jury decide that a highway is needed 
it may assess the damages to be paid to the owner of the land. 

Ownership of the Soil. — It will be seen that in none of the 
instances of the formation of highways just specified does the 
owner of the land lose his ownership of the soil of the highway, 
except in case of highways by deed. In each of the other in- 
stances the owner of the land through which the highway runs 
owns the soil itself of the highway. His ownership is subject 
to the public right of passage and use. If the highway is 
abandoned, or closed, the soil reverts to the owner. Even in 
case of a highway by deed, the soil may revert to the original 
owner, if the highway is discontinued. 



162 BUSINESS LAW. 

Closing of Highways. — The law is tenacious of the rights 
of the public to the use of a highway, and when a highway is 
once established it cannot be closed except by process of law. 
There is in each State, usually, a statute providing a method 
by which a highway may be discontinued or closed, providing 
it is no longer needed. As in case of laying it out, it is closed 
by a decision of a jury of the inhabitants. 

Conveyance of Highways. — We have seen that the original 
owner of the land may own the soil of the highway, subject to 
the public use. He may, therefore, sell and convey the highway, 
subject to the public use. It is important to know, therefore, 
when a deed of land includes the highway on which it fronts. 
If the land deeded lies on both sides of the highway or street, 
and the boundaries used m the description, include the high- 
way, the deed will convey the highway. It may be said gen- 
erally, that a deed of land includes the highway on which it 
fronts, unless the wording indicates a contrary intention. In 
all cases where a deed bounds land "on," "upon," "by" or 
"along" a highway, the deed includes to the centre of the 
highway. If the deed, however, bounds the land by the " line" 
of the highway, it does not convey any part of the street. A 
deed of a lot describing it by its number with reference to a 
map, does not usually convey to the centre of the street on 
which the lot fronts. If the grantee in a deed does not get 
title to any part of the street, he simply has the right to use 
the street as a means of access to his property, or the same 
right to use it as the public at large. On the other hand, the 
owner of the soil of the highway has an absolute right to use it 
for his individual purposes, so long as he does not hinder or 
obstruct the public use. He may prevent or restrain any ap- 
plication or use of it not properly pertaining to a highway, 
such as the laying of a street-railway track, or the erection of 
buildings or structures upon it. He may restrain the removal 
of shade trees upon it, provided they do not interfere with the 
public use. If the owner of adjoining land does not own the 
soil of the highway he cannot object to any use of it by the 
public, or by individuals, unless such use materially interferes 
with the access to his adjoining property. 



HIGHWAYS. 163 

Obstructions in Highways. — Highways being for the use 
and accommodation of the public, any obstruction which inter- 
feres with the free use of the whole road is unlawful. It is 
immaterial that only a part of the road is obstructed, and that 
travelers may pass along the other side, — they are entitled to 
the free and undisturbed use of the whole. Xo one has a law- 
ful right for instance, to use the highway for the purpose of 
loading or unloading goods ; for the erection of a booth or any 
object calculated to frighten horses, or for the purpose of de- 
positing building materials or goods. No one has a right to 
make any excavation in the surface, or beneath a highway, or 
overhang an awning or other structure. If such unauthorized 
use of the highway infringes the public right of use, it is a 
public nuisance, and may be punished by the public authorities. 
Any individual who is especially injured may restrain the en- 
croachment or may sue for damages. 

The Law of the Road. — It is the rule in this country that 
vehicles meeting on the highway must turn to the right. In 
England and in some other countries the rule is to turn to the 
left. Each vehicle is entitled to one half of the traveled portion 
of the road. The driver of a vehicle has no right to obstruct 
the passage of another vehicle, going in the same direction at 
a greater rate of speed. Vehicles of every description must be 
driven with that care and caution which the condition of the 
highway and the number using it, demands. 

Vehicles Having* a Right to the Highway. — It is now a 
settled rule that a bicycle is a vehicle and the rider has the 
same right to enforce the law of the road, as in case of any of 
the well known kinds of vehicles. A person may go upon the 
highway with any form of vehicle used for the transportation 
of goods or passengers and demand his lawful right to the reas- 
onable use of the highway. He may take a self-propelling or 
traction engine upon it if he chooses, although in such case he 
does so at the risk of paying damages for injuries which he 
may cause, providing the engine or such other object as he 
takes upon the highway, is an unusual or extraordinary object, 
and calculated to frighten horses. 

Repair of Highways. — A person who owns land adjoining 



164 BUSINESS LAW. 

a highway is under no obligation to repair a defect which may 
arise in it, and is not liable for a state of disrepair, unless 
caused by his own act. By the common law there is no obli- 
gation resting upon individuals or the public authorities to 
keep highways in repair. The duty is regulated by statute. 
The highway statutes of each State impose the obligation upon 
the town, city or village in which a highway is located, to keep 
it in a proper state of repair. For a failure to perform its duty, 
or for a failure of the highway commissioners or other proper 
officers *to perform their duties, the town, city or village is lia- 
ble for damages to any one injured. The general rule, there- 
fore, is this : it is the duty of every town, village or city in 
which a highway is located, to keep the same in a proper state., 
of repair, and in a reasonably safe condition for all who may 
have occasion to use it in an ordinary and usual manner. The 
obligation does not extend to the use of the highway for extra- 
ordinary loads or burdens. For instance, if a culvert or bridge 
on a country highway goes down under the weight of an ele- 
phant, passing with a menagerie, the town is not liable, pro- 
viding the bridge was in a reasonably safe condition. 

Vehicles and Pedestrians. — The relative rights of vehicles 
and pedestrians in a public highway, or city street, is a fre- 
quent matter of dispute and is frequently misunderstood. The 
invariable rule is that each has equal rights. Each is bound 
to exercise that degree of care and prudence which the circum- 
stances of the case demand. Vehicles cannot rush along re- 
gardless of pedestrians, nor can pedestrians demand that vehi- 
cles give way to them. The obligations are mutual. It is the 
duty of drivers to turn aside or stop their teams to avoid in- 
juring people who may be crossing the street. At the same 
time, it is the duty of a pedestrian to look in either direction 
for approaching teams, and to use ordinary care and prudence 
in avoiding them. If a pedestrian makes a mistaken estimate 
as to his ability to cross in front of an approaching team, and 
is injured by reason of his mistake, he cannot recover damages. 
Pedestrians are under the same obligation to watch for street 
cars, and street car drivers are in duty bound to exercise the 
same degree of care to avoid pedestrians. 



HIGHWAYS. 165 

Vehicles and Street Cars. — The law of the road which, as 
we have seen, requires vehicles meeting each other, to pass to 
the right of the center of the traveled road and to use ordinary 
care and caution in passing, does not apply to vehicles meeting 
street cars. A vehicle is bound to give the street car the right 
erf way, as the track is set apart for the exclusive use of the 
car. But on the other hand, a vehicle meeting a car may turn 
either to the right or to the left, and if a collision occurs, the 
mere fact that the driver of the vehicle turned to the left in-. 
stead of the right, will not affect the case. It is held that the 
driver of a vehicle on a street car track must be constantly on 
the look out for the coming of a car, and that it is his duty to 
turn off the track upon the approach of the car. 

Kate of Speed. — Vehicles or street cars cannot be driven at 
an immoderate rate of speed. Immoderate speed imposes an 
obligation to pay damages for injuries to others, although the 
injured person may have been negligent. If a collision occur 
between vehicles where each has been negligent, the injured 
party is not entitled to damages, unless the accident could not 
have been averted by him by the exercise of ordinary care. 
Every person using a street, whether as a pedestrian or as the 
driver of a vehicle, has a right to expect from others, ordinary 
care and prudence. He may rely upon the fact that every one 
is supposed to exercise that care in determining his own man- 
ner of usins: the road. 



x o 



QUESTIONS. 

Page 160. — What is a highway ? Define highway by deed By dedi- 
cation. 

Page 161. — Define a highway by prescription. A highway by statute, 
Who is the owner of the soil of highways ? 

Page 162. — How are highways closed ? When does the grantee of land 
on a highway get title to the center ? What are the rights of the owner 
of the soil of a highway ? 

Page 163. — What are unlawful obstructions in highways ? What 
vehicles have the right of way ? Upon whom does the obligation to re- 
pair a highway rest ? 

Page 164. — What are the relative rights of vehicles and predestrians ? 

Page 165 — What are the relative rights of vehicles and street cars ? 
What is said in regard to the rate of speed in highways ? 






DEFINITIONS. 



Abandonment. In marine insurance, the giving up of property partly- 
destroyed, by the owner to the insurer. 

Abatement of a Nuisance. The remedy which the common law allows 
a party injured by a nuisance, of destroying or forcibly removing it, 
so long as he occasions no damage beyond what the abatement neces- 
sarily requires. 

Abatement Among Legatees. The proportionate reduction of lega- 
cies, where the estate bequeathed by a will is not sufficient to pay all 
legacies in full. 

Abjuration of Allegiance. The declaration under oath required of 
every alien before naturalization, renouncing all allegiance to an}' 
other sovereign. 

Absolute Conveyance. A transfer of property free of any condition or 
reservation. 

Abutting. Bordering upon. Lands bounded by a highway or fresh 
water stream abut on the stream or road, and the owners are called 
abutting owners. 

Acceptance. In mercantile law : (1) The act by which the person upon 
whom a bill of exchange or other order is drawn, engages to pay it. 
(2) The bill after it has been accepted. 

Acceptor. One who accepts an order, draft, or bill of exchange. 

Accommodation Paper. Commercial paper for which no consideration 
passed between the original parties. 

Accord. Agreement. 

Account Stated. An account balanced and rendered, and assented to by 
the parties although not paid. 

Acknowledgment. The act by which a party who has executed an in- 
strument declares or acknowledges it before a competent officer to be 
his or her act and deed. 

Action, The formal means of recovering one's rights in a court of jus- 
tice — a suit. 

Act of God. Any accident produced by a physical cause which is irre- 
sistible, such as lightning, tempest, etc. 

Ad Valorem Duties. Customs duties imposed upon imported articles 
according to either the value or the actual cost. 

Adjudication. The act of a court in giving judgment in suit or con- 
troversy. 
, Admeasurement of Dower. The setting apart for the use of the widow 
of such a portion of land as will amount to her dower or "third;" 
called also assignment of dower. 

166 



DEFINITIONS, 167 

Administrator. One who administers on the property or estate of a 
person dying intestate, and is accountable for the same. 

Affidavit. A statement in writing, signed by the person making it, 
called the affiant, and sworn to before a notary public or officer 
authorized to take oaths. 

Affinity. Relationship by marriage. 

Affreightment. The hiring of a ship for the conveyance of goods. 

Agency. The relation existing between two parties, by which one is 
authorized to do certain acts for the other, with other parties. 

Agent. Any person who is employed by another to do any act for the 
employer's benefit or account. 

Age of Consent. The age at which infants are capable of making a valid 
contract of marriage. 

Alien. One born out of the jurisdiction of the United States and owing 
allegiance to a foreign sovereign. 

Alien Enemy. An alien who is the subject of a hostile power. 

Alimony. An allowance made to a wife out of her husband's estate 
during a suit for divorce or separation, or at its termination, for her 
life or for a shorter period. 

Alteration. The changing of the words or figures of a written instru- 
ment by the holder after it has been executed and delivered. If the 
change is not sufficiently material as to mislead anyone, it is not 
usually called an alteration. 

Amotion. Removal of an officer of a corporation. 

Ante-dated. Dated at a time earlier than the actual date. 

Annulment. The act of making void. 

Appurtenance. In a deed or lease, anything which will go with the 
land, as a right of way or a yard which has always been used with it. 

Arbitration. The investigation and determination of a cause or matter 
in controversy by an unofficial person, or arbitrator. 

Arbitrator. A disinterested person selected by parties in dispute to 
decide the controversy. 

Articles of Copartnership. The written agreement by which a copart- 
nership is formed. 

Assault. An illegal and forcible attempt or offer to do a bodily harm to 
another. 

Assent. Act of agreeing to anything; consent. 

Assets. Property available for the payment of debts. 

Assignee. The person to whom the failing debtor transfers all his re- 
maining property for the purpose of having it distributed among his 
creditors ; one to whom anything is assigned. 

Assignment. A transfer by a failing debtor of his property to an assignee. 
A transfer by one person to another of any property, personal or real. 

Assignor. One who assigns property. 

Assurance and Assured. Same as Insurance and Insured. 



168 BUSINESS LAW. 

Attachment. The seizure of a defendant's property by legal process f 
in order to satisfy any judgment which may be rendered against him 
in the suit. 

Attorney in Fact. An agent appointed by power of attorney. 

Award. The decision of arbitrators. 

Bailment. A delivery of goods in trust upon a contract, express or im- 
plied, that the trust shall be faithfully executed on the part of trie 
bailee. The bailor is he who delivers; the bailee, he to whom delivery 
is made. The hire of personal property, of services, of custody and 
of carriage are species of bailments. 

Bank Bill. A written promise to pay to the bearer on demand a certain 
sum of money, issued by a bank and used as money. 

Bank Note. Same as Bank Bill. A note payable at a bank. 

Bankruptcy. The condition of one who is unable to pay his debts. 

Bargain. A common synonym of contract. 

Barratry. Any breach of duty committed by the master of a vessel or 
the seamen, without the consent of the owner, by reason of which 
the ship or cargo is injured. 

Barter. To trade by exchange of goods, in contra-distinction from 
trading by the use of money. 

Battery. An unlawful assault committed by one person upon another. 

Beneficiary. (1) In life insurance, the person to whom a policy is made 
payable. (2) The person for whose benefit another holds the legal 
title to real estate. 

Betterments. Improvements made to real estate which render it better 
than mere repairs. 

Beyond Seas. Denotes absence from the country, and generally held to 
mean absence from the particular State. 

Bigamy. The wilfully contracting a second marriage while a husband 
or wife is still living. 

Bill of Exchange, A direction in writing, by the person who signs it, 
ordering the one to whom it is addressed to pay a third person a 
definite sum of money at a specified time. 

Bill of Lading. A document delivered by a carrier to one sending goods 
by him, acknowledging that they have been received by him for trans- 
portation to a certain place. It is both a receipt and a contract. 

Bills Receivable. Notes, drafts or other securities for money, which a 
merchant holds. 

Bill of Sale. An agreement in writing by which one person sells his 
interest in personal property to another. 

Blank Indorsement. One in which no particular person is named as 
the one to whom payment is to be made. It consists of the indorsees 
name alone. 

Blockade. The closing of communication with a port or place by hostile 
forces. 



DEFINITIONS. 16& 

Body Corporate. A corporation. 

Bona Fide. In good faith, as distinguished from Mala Fide, in bad faith. 

Bond. A written and sealed instrument by which one agrees to pay to 
another a certain amount of money, unless something else specified 
therein is done. 

Bonus. An additional premium paid for the use of money beyond the 
legal interest. 

Bottomry Bond. An obligation given for a loan upon a vessel and 
accruing freight. 

Bought and Sold Note. A written memorandum of sale, delivered by 
a broker effecting a sale, to the buyer. 

Breach. In the law of contracts, the violation of an agreement or 
obligation. 

Bribery. Receiving or offering a reward to affect the conduct of a 
public officer. 

Broker. One engaged in negotiating contracts for the purchase or sale 
of property in which he has no interest. 

Bullion. Any kind of gold or silver in the mass or lump. 

By-Bidder. A person employed to bid at auctions in order to raise the 
price of articles to be sold. 

By-Laws. The private laws or regulations made by a corporation for its 
own government. 

Cancellation. The manual act of erasing or destroying a writing. 

Capita. By the head. 

Capital Stock. The fund or property, as a whole, contributed or sup- 
posed to have been contributed to a corporation at its organization, 
as its property. 

Caveat. In the patent law, a notice from an inventor not to issue a patent 
of a particular description to another. 

Caveat Emptor. Latin phrase, meaning "let the purchaser beware," 
and applies to a case in which the thing sold is before the buyer and 
he examines it. 

Certificate of Deposit. A certificate issued by a bank or banker, show- 
ing that a certain sum of money has been deposited there, payable to 
a certain person, or to his order, or to the bearer. 

Certificate of Stock. A certificate given by the proper officers of a cor- 
poration, showing that a certain person owns a certain number of 
shares of the capital stock. 

Certification (of check). The signature of the proper officer of the bank 
written across its face, sometimes with and sometimes without the 
word "certified," or " good." It is a recognition of the check by the 
bank as good in two particulars, viz. : (1) That the drawer's signature 
is genuine, and (2) that he has that amount of money in the bank. 

Charter. (1) A special act of legislature creating a particular corpora- 
tion. (2) To hire or let a vessel or part of it. 



170 BUSINESS LAW. 

Chartered Ship. One let wholly or in part. 

Charter Party. The written instrument by which the owner of a vessel 

lets it, or a part of it, to another. 
Chattel Mortgage. A conditional sale of personal property, one which 

is to become void if a certain thing happens. Chiefly used as a se- 
curity for the payment of money. 
Chattel Real or Real Chattel. An interest connected with real estate, 

as a lease. 
Chattels. Commonly means goods of any kind, or every species of per 

sonal property. 
Check. A written order for money drawn upon a bank or banker, and 

payable immediately. 
Chose in Action. A thing' of which one has not the possession, but only 

a right to demand it by action at law. 
Chose in Possession. Personal property of which one has the actual 

possession. 
Civil Law. The system of law of ancient Rome. 
Civil Remedy. The method of redressing an injury inflicted by one 

person upon another. 
Clearing House. An office where bankers settle daily with each other 

the balances of their accounts. 
Codicil. Some addition to, or qualification of a will, executed after the 

will. 
Collateral. Property pledged as security for the performance of a contract. 
Common Carrier, One who, as a business, undertakes for hire to trans- 
port from place to place, passengers or goods of all who choose to 

employ him. 
Common Law. The unwritten law as distinguished from written or 

statute law. The old law of England that derives its force from 

long usage and custom. 
Common Seal. The seal of a corporation. 
Compact. An agreement between parties similar to a contract. 
Competency. The legal fitness of a witness to give evidence on the trial 

of dn action. 
Composition Deed. An agreement between an insolvent debtor and his 

creditors by which upon payment to each of some fixed proportion 

of his claim, they all agree to release the debtor from the balance of 

their claims. 
Compromise. An agreement between a debtor and his creditors, by 

which they agree to accept a certain proportion of the amounts due, 

and discharge him from the remainder. 
Concurrent. Existing together. A consideration is concurrent when the 

acts of the parties are to be performed at the same time. 
Condition Precedent. An act which must be performed by one person 

before another is liable, or in order to make him liable. 



DEFINITIONS. 171 

Confirmation, The ratification of a contract which was voidable, where- 
by it is made valid. 
Conflict of Laws. The difference between the laws of two or more 

States. 
Confusion of Goods. A mixture of the goods of two or more persons 

so that they cannot be distinguished. 
Consanguinity. Relation by blood. 

Consent. A concurrence of the wills of two or more contracting partios. 
Consideration. The reason or inducement in a contract upon which 

the parties consent to be bound. 
Consignee. One to whom merchandise, given to a carrier by another 

person for transportation, is directed. 
Consignment. The goods shipped through a common carrier by the 

consignor to the consignee. 
Consignor. One who gives merchandise to a carrier for transportation 

to another. 
Contract. An agreement between two or more persons to do or not to 

do a particular thing. 
Conversion. An unlawful exercise of ownership over goods or personal 

property belonging to another. 
Conveyance. (1) The act of carrying by land or water. (2) The 

means of conveyance. A written instrument by which an estate in 

land is transferred from one to another. 
Copartnership. Same as partnership. 
Corporation. An artificial being or person endowed by law with the 

capacity of perpetual succession, and of acting in certain respects 

like a natural person. When it consists of one individual it is termed 

a corporation sole, and when composed of a collection of several 

individuals it is called a corporation aggregate. 
Copyright. The exclusive privilege secured from a government for 

printing, publishing and selling copies of writings or drawings. 
Counter-Claim. Same as Set-off. 
Course of Exchange. The current price of bills of exchange between 

two places. 
Covenant. Any promise contained in a sealed instrument. The person 

to whom the promise is made is the Covenantee. The person making 

the promise is the Covenantor. 
Coverture. The legal state and condition of a married woman. 
Criminal Kemedy. The method of punishing a wrong-doer for some 

wrong committed by him against society. 
Curtesy. The estate a man has in the lands of his wife upon her death. 

in case a living child has been born to them during their marriage. 
Damages. Compensation in money to be paid by one person to another 

for an injury inflicted by the former upon the latter, or for the failure 

to keep a contract. 



172 BUSINESS LAW. 

Day. Twenty-four hours. An entire day. 

Days of Grace. Days (usually three) allowed by custom for the payment 

of bills and notes beyond the day expressed for payment on the 

face of them. 
Declaration of Intention. The act of an alien who goes before a court 

of record and formally declares his intention to become a citizen of 

the United States. 
Dedication. An appropriation of land made by the owner to some public 

use, usually for a highway, and accepted for such use by the public. 
Default. Omission; neglect or failure. 

Defeasance. An instrument which defeats the effect of another instru- 
ment. If it is in the same deed it is an addition; if by itself, it is a 

defeasance, 
Defense, The answer made by the defendant to the plaintiff's action, by 

demurrer or plea at law. 
Delivery. The transfer of a written instrument from the person execut- 
ing it, or the grantor, to the person entitled to receive it, or the 

grantee. 
Demand. Presentment for payment. 
Demurrage. The allowance to be made by the shipper to the vessel 

owner as damages for detention of the vessel beyond the time 

specified in the charter party. 
Deposit. A bailment or delivery of goods to be kept and returned with- 
out recompense. 
Deposition. The testimony of a witness reduced to writing to be used 

in court. 
Descent. Inheritance of real property. 
Deviation. In the law of marine insurance, a voluntary departure 

without necessity from the regular course of the specific voyage 

insured. 
Devisee. A person to whom real property is devised or willed. 
Disability. Want of qualification; incapacity to do a legal act. 
Disaffirmance. The annulling or cancelling of a voidable contract. 
Discount. (1) The taking of interest in advance. (2) A deduction from 

a price asked, or from an account, debt, or demand. 
Disfranchisement. Expulsion of a member from a corporation. 
Dishonor. The non-payment of negotiable paper when it is due. 
Distress. The taking of personal property to enforce the payment of 

something due, as rent. 
Distribution. The division among those entitled, called the next of 

kin, of the personal property of one dying without a will. 
Divorce. The separation of husband and wife by the sentence of the law. 
Dollar. The money unit of the United States. 
Domestic Relations. The relations of the members of a household or 

family. 



DEFINITIONS. 173 

Domicile. The place where a man has his permanent home, and to 

which he intends to return if absent. 
Dower. The right of a widow to the use or ownership of some portion 

of the real estate owned by her husband. 
Draft. Same as bill of exchange. 
Drawee. The person upon whom a bill of exchange is drawn, who is 

directed to make the payment. 
Drawer. The person who draws or makes a bill of exchange. 
Duress. Personal restraint or compulsion. 
Easement. The right to use another's land. 
Effects. All kinds of personal property. 

Ejectment. A form of law suit to regain possession of real property. 
Embezzlement. The fraudulent removal or secretion of personal prop- 
erty by one who is intrusted with it. 
Emblements. Growing crops of any kind produced by expense and 

labor. 
Embracery. The attempt to corrupt or influence a jury. 
Eminent Domain. The right of the sovereign power to take private 

property to public purposes. 
Enact. To make a law or to establish by law. 
Equitable Estate. An interest in land not evidenced by a deed, but of 

which a Court of Equity will take notice. 
Equity of Redemption. The right which a mortgagor has to redeem 

his estate after the mortgage has become due. 
Escheat. The reverting of land to the State upon the death of the 

owner without lawful heirs. 
Escrow. A deed or bond delivered to a third party to be held and de- 
livered to the grantee or creditor upon the performance of some 

condition. 
Estate. An interest in real property. 
Estate by Curtesy. See Curtesy. 
Estate for Life. An interest in land for life. 
Estate in Fee-Simple. The interest which a man or his heirs have in 

land without end or limit. 
Eviction. The forcible removal of a tenant from land leased by him or 

the doing of any act by the landlord which deprives the tenant of the 

of the use of the land. 
Executed, (of a contract). Finished. 
Execution. (1) A written command issued to a sheriff or constable, 

after a judgment, directing him to enforce it. (2) The act of signing 

and sealing a legal instrument, or giving it the form required to 

make it a valid act. 
Executor. One to whom is committed the execution or carrying out of 

the terms of a will. 
Executory (of a contract). Unfinished. 



174 BUSINESS LAW. 

Exemplary Damages. Damages allowed as a punishment for a wrong- 
ful act deliberately or maliciously committed. Such damages are in 
addition to actual damages. 

Ex Post Facto Law. A statute which renders an act punishable in a 
manner in which it was not punishable when it was committed. 

Extradition. The surrender by one government to another of a person 
charged with crime. 

Factor. An agent employed to sell goods on commission. 

Fee Simple. Full ownership in lands. 

Feud, An estate in land, held of a superior by service ; a fief. 

Feudal System. The system of feuds or fiefs. 

Firm. All the members of a partnership taken collectively. 

Fixtures. Articles of personal property which have become affixed to 
land. 

Foreclosure. The process of cutting off the right or interest of the 
mortgagor and his assignees in mortgaged premises. 

Forfeiture. A loss of property, right, or office, as a punishment for 
some illegal act or negligence. Sometimes applied to the thing for- 
feited. 

Forgery. The fraudulently making or altering of a written instrument. 

Franchise. A privilege, or right, conferred by grant from government 
upon individuals. 

Fraud. Any cunning, deception, or artifice used to circumvent, cheat, 
or deceive another. 

Freight. The compensation to be paid a carrier for the transportation 
of goods, or the goods themselves while being transported. 

General Average. A contribution made by the owners of a vessel and 
cargo toward the loss sustained by one of their number, whose prop- 
erty has been sacrificed for the general safety. 

General Ship. A vessel navigated by its owner, receiving and carrying 
freight indifferently for all who apply. 

Goods. Same as chattels and effects. 

Good Will. Benefit arising from the successful conduct of business by 
a certain person or firm, usually in a certain place; it is a property 
subject to transfer. 

Guaranty. A contract whereby one person engages to be answerable 
for the debt or default of another person. Guarantor is he who 
makes the guaranty. 

Guardian. One who is entitled to the custody of the person or property 
of an infant. 

Guest. A person received and entertained at an inn or hotel. 

Habeas Corpus. A direction signed by a judge or officer of a court 
directing a person detaining another to produce the prisoner at a 
certain time and place. 

Heir. One who inherits land upon the death of the owner. 



DEFINITIONS. 175 

Highway. A passage, road or street, which every citizen has the right 
to use. 

Hire. A bailment in which the compensation is to be given for the use 
of a thing, or for labor and services performed upon it. 

Holding' Over. The act of a tenant in remaining in possession of land 
after the expiration of his lease. 

Idiot. One who never had reasoning power. 

Importation. The act of bringing goods and merchandise into the 
United States from a foreign country. 

Imposts. Duties on imported goods. 

Inchoate. Incipient; incomplete. 

Incompetency. Lack of necessary legal qualifications. 

Incorporate. To form into a corporation. 

Incumbrance, A lien upon land as by judgment or mortgage. 

Indemnity. Compensation for damage suffered, or that which is given 
or promised to a person to prevent his suffering damage. 

Indorsement (of commercial paper). (1) A name, with or without other 
words, written on the back of the paper. (2) The agreement implied 
in one's writing his name on the back of commercial paper, to pay it 
if the principal debtor does not. The one who makes the indorse- 
ment is called the indorser. The person in whose favor the indorse- 
ment is made is called the indorsee. 

Infant. In law, is one under the age of twenty-one years. 

Injunction. An order or direction of the court compelling a certain 
person to refrain from doing some particular act or thing. 

Insolvency. Same as Bankruptcy. 

Insurable Interest. Such an interest in the thing insured that the 
person possessing it may be injured by the risk to which the thing 
insured is exposed. 

Insurance. A contract of indemnity against loss from certain causes. 
The insurer is the party agreeing to make the insurance. 

Interest. Compensation allowed by the borrower of money to the lender 
for its use, or compensation paid by a debtor to his creditor, as 
recompense for the detention of the debt. 

Invalid. Of no legal force. 

Inventory. (1) An account or catalogue of goods or movables. (2) In 
law a list or schedule in writing of the goods, chattels, and credits 
(and sometimes of the real estate) of a testator or intestate, made by 
an executor or administrator. 

Jettison. The casting out from a vessel of a part of the cargo, in order 
to avoid a ship-wreck. (2) The cargo thus cast out. If the goods 
float it is called flotsam. 

Joint Stock Company. A species of partnership. 

Joint Tenants. Two or more persons to whom land is conveyed by 
deed or devised by will. 



L76 BUSINESS LAW. 

Judgment. The sentence of the law pronounced by the court upon any 
matter contained in the record, or in any case tried by the court. 

Judgment Debtor. Party against whom a judgment is obtained. 

Judgment Note. A promissory note In the usual form, and containing 
in addition a power of attorney on the part of the maker authorizing 
tin; holder to take judgment for the amount due, if tin; note is dis- 
honored. 

Judicial Sale. A sale directed by a court; as a sale on the foreclosure 
of a mortgage. 

Landlord. (1) One who owns and rents or leases lands or houses. (2) 
The host or keeper of an inn; an inn-keeper. 

Law. The rules and methods by which society compels or restrains the 
action of its members/ 

Law Merchant. The general body of usages in matters relative to 
commerce. 

Lay Corporation, A corporation composed of lay persons, or for lay 
purposes, as distinguished from religious or charitable; corporations. 

Lease. A contract by which one person grants to another for a period, 
the use of certain real estate. 

Legacy. A gift by will; commonly applied to money or personal 
property. 

Legal Tender. That kind of money which by law can be offered in 
payment of a debt. 

Lessee. A person to whom a lease is made. 

Letter Of Attorney. Another name for power of attorney. 

Letters of Administration. An instrument issued out of the court 
having jurisdiction, granting power to settle the estate of one dying 
without leaving a will. 

Letter of Credit. A written direction by some well-known banker 
authorizing the party to whom it is addressed to draw upon him in 
a particular manner for any amount he chooses up to a specified 
limit. 

Letters Testamentary. An instrument out of the court having juris- 
diction, granting power to the person named as executor in a will to 
cany out the provisions of the will. 

Libel. To defame by published writing, printing, signs, or pictures. 

License. A permission or right granted to another, by one having au- 
thority, to do an act which would be il egal if unauthorized. 

Lien. A right which one person has to retain the property of another by 
way of security for a debt or claim. 

Liquidate. To pay; to settle an account. 

Liquidated Damages. Damages agreed upon by the parties to a con- 
tract, at the time of tin; making of the contract, to be paid by the 
party failing to perform it. 

Litigation. The act of litigating; judicial contest; a suit at law. 



DEFINITION'S. 177 

Loan. A bailment of an article for use or consumption without reward. 
If the loan is for consumption, the article is to be returned in time; 
if the loan is for use, the article is to be returned without compen- 
sation for the use. 

Log-book. A ship's journal containing a minute account of the ship's 
course, and a reference to every occurrence of the voyage. 

Lottery. A scheme for the distribution of prizes by chance. 

Low Water Mark. That part of the shore of the sea to which the 
waters recede when the tide is lowest. 

Lucid Intervals. Periods from time to time in cases of lunacy in which 
the person afflicted becomes sane. 

Lunatics. Persons who have lost their reason. 

Maintenance. Support by means of food, clothing, and other necessaries. 

Malicious Mischief. The wanton or reckless destruction of property 
or injury to the person. 

Malicious Prosecution. The willful institution of a law suit or criminal 
proceeding without probable cause. 

Mandate. A bailment of personal property in which the bailee under- 
takes without compensation to do some act for the bailor in respect 
to the thing bailed. The bailor is generally termed the mandator, 
and the bailee the mandatary. 

Mania. A form of insanity. 

Manifesto. A declaration by a nation stating the reasons for its acts 
toward another nation. 

Maritime Law. That branch of the law which relates to the affairs of 
navigation and shipping. 

Marriage Settlement. An agreement made by parties contemplating 
marriage by which the title to real or personal property is changed. 

Martial Law. The military rule existing in time of war. 

Material Men. Persons who furnish materials to be used in the con- 
struction of ships or buildings. 

Maturity. The time at which commercial paper legally becomes due. 

Measure of Damages. The rule by which the damages sustained by 
the plaintiff in a law suit is to be estimated. 

Merger. The absorption or extinguishment of one contract in another. 

Minor. Same as Infant. 

Misdemeanor. A lower kind of crime; an indictable offense not amount- 
ing to felony. 

Misnomer. In contracts a mistake in the name of a party; it does not 
avoid the contract if the proper party can be ascertained. A mis- 
nomer of a legatee in a will does not generally avoid the legacy. 

Misrepresentation. A false and fraudulent statement made by a party 
to a contract relative to a particular fact, knowing that the statement 
is untrue. 

Misuser. The abuse of any liberty or benefit. 



178 BUSINESS LAW. 

Money. The common medium of exchange in civilized nations. 

Month. Generally in this country, where used in contracts, means a 
calendar month. 

Monuments. Permanent land-marks indicating the boundaries of land. 

Mortgage. A grant or conveyance of an estate or property to a creditor, 
for the security of a debt, and to become void on payment of such 
debt. The mortgagor is the one who gives the mortgage upon his 
property; the mortgagee the one to whom the mortgage is given. 

Municipal, Of or belonging to a city; but municipal law is the name 
given to the system of law of any one nation or state. 

Municipal Corporation. A public corporation created by the govern- 
ment for political purposes, as a county, town or city. 

National Currency. National Bank bills. 

Necessaries. Such things as are proper and necessary for the sustenance 
of man. 

Negotiable Paper. An instrument as a bill or note, which may be 
transferred from one to another by assignment or indorsement. 

Negotiation. In mercantile law, the act by which negotiable paper is 
put into circulation by being passed from one of the original parties 
to another. 

Nominal Damages. Those given for the violation of a right from which 
no actual loss has resulted. 

Non-Suit. The name of a judgment given against a plaintiff when he 
is unable to prove his case. 

Nonuser. A failure to use rights and privileges. 

Notary Public. An officer appointed variously under the laws of dif- 
ferent States, whose acts are respected by the law-merchant and the 
law of nations, and hence have force out of their own State or country. 

Notice of Protest, also called Notice of Dishonor. The notice given 
to a drawer or indorser of a bill, or an indorser of a negotiable note, 
by a subsequent party that it has been dishonored either by non- 
acceptance or non-payment. 

Notice to Quit. A request of a landlard to his tenant to quit the premises. 

Nuisance. Anything that unlawfully injures or damages a person in the 
enjoyment of life and property. 

Nuncupative Will. An oral will declared by a testator at the point of 
death, before witnesses, and afterwards reduced to writing. The 
power to make nuncupative wills is usually confined to persons in 
the army or navy service. 

Oath. A pledge given by the person taking it, that his promise is made 
under an immediate sense of his responsibility to God. 

Open Policy. One in which there ia no valuation of the thing insured. 

Oral Contract. An agreement made by means of spoken words. 

Ordinance. A rule, or order, or law. Usually applied to the acts or 
laws passed by the common council of a city. 



DEFINITIOXS. 179 

Outlawed. A debt is said to be outlawed that has existed for a certain 
length of time, after which the law on that ground alone prevents its 
being enforced. 

Par. Equality of value. Bills of exchange and stocks are at par when 
they sell for their face value. They are above or below par when 
they are worth more or less than their face value. 

Parol Contract. Any agreement not under seal. It is often used as 
synonymous with oral contract. 

Partners. The members of a firm or partnership. Dormant partners 
are those whose names are concealed from the public; ostensible 
partners are those whose names are held out to the public as the 
members of the firm; nominal partners are those who appear to the 
public as members of the firm but have no real interest. 

Partnership. The relationship resulting from an agreement between 
two or more persons to place their money, effects, labor and skill, or 
some or all of them, in some enterprise or business, and divide the 
profits and bear the losses in certain proportions. 

Party-Wall. A wall common to two adjoining estates. 

Pawn. Same as Pledge. 

Payee. The person to whom the payment of any kind of commercial 
paper is directed to be made. 

Payment. The fulfillment of a promise, or the performance of an agree- 
ment, usually by the delivery of a sum of money. 

Penalty. Forfeiture, or sum to be forfeited, for non-performance of an 
agreement. 

Per Centum or Per Cent. By the hundred. 

Perils of the Sea. All the dangers naturally incident to navigation. 

Perjury. A willfully false statement, by one who is lawfully required 
to depose the truth, and who is lawfully sworn, made in a judicial 
proceeding, and in relation to a matter that is material to the point 
in question. 

Personal Property. Consists of such things as are movable, and may 
be taken by the owner wherever he goes. 

Pledge. A bailment of personal property to secure the payment of some 
debt or the fulfillment of some agreement. The bailor is called the 
pledgor, and the bailee the pledgee. 

Pledgee. A person in favor of whom some obligation is contracted, 
whether to pay money or to perform some act. 

Pledgor. The person entering into an obligation to pay money or per- 
form some act. 

Policy. The written contract of insurance. 

Poor Debtor. A person arrested or imprisoned for debt, and entitled 
to discharge upon making oath that he has no property with which 
to pay the debt. There are but few States in which arrest is allowed 
for an ordinary contract debt. 



180 BUSINESS LAW. 

Post-Dated, Having a date subsequent to that at which it is actually 
made. 

Power of Attorney. A written instrument under seal by which one 
party appoints another to be his attorney, and empowers such attorney 
to act for him. 

Premium. The consideration or price paid for insurance. 

Prescription. The right to a thing derived from immemorial usage. 

Presumption. An inference of the law, from certain facts, of the ex- 
istence or truth of some other fact or proposition. 

Price. The consideration given in money for the purchase of a thing. 

Prima Facie. Literally, at the first appearance. Prima facie evidence 
is that which is sufficient to establish a fact, unless it be rebutted or 
contradicted. 

Principal. (1) A party for whom another is authorized to do certain 
acts with third parties. (2) A sum of money at interest. 

Privity of Contract. The relation which exists between two parties 
who have made a contract. 

Probate of a Will. The proof given before a court or judge that an 
instrument produced as the will of a deceased person, is in fact what 
it purports to be. 

Promissory Note. A written promise, signed by the person promising, 
to pay a certain sum of money at a certain time to a person named, 
or to his order, or to the bearer. 

Prosecute. To proceed against by legal measures. 

Protest. A formal declaration in writing by a notary public of the de- 
mand and refusal to pay a note or bill. 

Proxy. (1) One who represents another. (2) A writing by which one 
authorizes another to vote in his place. 

Public Enemies. Those who belong to a nation at war with another. 

Puifer. Same as By-Bidder. 

Quasi. As if ; as though. 

Quasi Corporation. A public body or municipal organization which 
is not vested with the general powers of corporations, but is recog- 
nized by a statute or usage as persons or aggregate corporations with 
the power of suing and being sued. 

Quit Claim Deed. A form of deed in the nature of a release without 
covenants of any kind. 

Eatiflcation. Giving force to a contract made by the person in ques- 
tion, but not now in force, or by another man as his agent. 

Real Covenant. A covenant connected with the conveyance of land, 
and which runs with the land, and which any owner of the land can 
enforce, although he be not a party to the instrument in which the 
covenant is contained. 

Real Estate. Same as real property. 

Real Property. That which is fixed or immovable, and includes land 






DEFINITIONS. 181 

and whatever is erected or growing upon it, with what is beneath or 

above the surface. 
Realty. Same as real property. 
Receipt. A written acknowledgment by one receiving money or other 

property that it has been received. 
Receiver. Usually means a person appointed by a court to take and 

hold property in dispute, or the property of a bankrupt. 
Recoupment, A reduction or diminution of damages in an action on 

contract for breach of warranty or defects in performance. 
Recovery. The amount of the judgment which the party to an action 

recovers. 
Re-enact. To enact anew. 
Registry. The entering or recording of real estate conveyances in 

books of public record. 
Reinsurance. Insurance effected by an insurance company to protect 

itself against insurance risks which it has assumed. 
Release. An instrument in the general form of a deed that in distinct 

terms remits the claim to which it refers; and being under seal, 

although reciting only a nominal consideration, extinguishes the debt. 
Remedy. The legal means employed to enforce a right or redress an 

injury. 
Rent. Compensation for the use of real property. When stated in a 

lease it is called rent reserved. 
Rescission. The annulling or dissolution of contracts by mutual con- 
sent, or by one party because of a breach of the contract by the 

other. 
Respondentia Bond. The obligation given for a loan made upon the 

cargo of a vessel. 
Revert. To fall again into the possession of the donor, or of the former 

proprietor. 
Right of Survivorship. This means that the survivor or survivors take 

the right or interest of their deceased joint tenant, which in other 

cases would go to his heirs. 
Riparian Owners. Those who own land bounded by a water course. 
Salvage. Property saved from wreck or loss at sea; or compensation 

given for service rendered in saving it. 
Satisfaction. Payment of a legal debt or demand; the discharging or 

cancelling of a judgment or a mortgage, by paying the amount of it. 
Scrip. Certificate of stock. 
Seal. An impression upon any impressible substance; or a piece of 

papeY pasted on with intent to make a seal of it. 
Sea-worthiness. The sufficiency of a vessel in materials, construction 

and equipment for the service in which it is employed. Sea-worthi- 
ness is an implied condition of marine insurance; unsea- worthiness 

defeats insurance. 



182 BUSINESS LAW. 

Set of Exchange. The different parts of a bill of exchange taken to- 
gether. Each part is a perfect instrument by itself, and the payment 
of any one avoids the others. 

Set-Off. A claim which one party has against another who has a claim 
against him ; a counter-claim. 

Severalty, A state of separation. An estate in severalty is one held by 
one person in his own right. 

Severance. The removal of fixtures from land. 

Shipper. One who gives merchandise to another for transportation. 

Shipping 1 Articles. The agreement between the master of a vessel and 
the seamen determining the nature of the contract. 

Slander. Injurious words spoken of another, but not published. 

Slander of Title. A statement tending to injure the title of another by 
minifying or cutting it down. 

Smart Money. Damages beyond the thing sued for, allowed on the 
ground that the offense may be so great that the offender ought to be 
made an example of. 

Specialty. A contract under seal. 

Specific Performance. The actual performance of a contract by the 
party bound to fulfill it. 

Statute. An act of the Legislature. 

Statute of Frauds. An English statute, generally re-enacted in this 
country, requiring certain contracts to be made in writing, designed 
to prevent fraud and perjury. 

Statute of Limitations. A statute requiring an action to be com- 
menced within a certain time after the demand has arisen. It limits 
the time to sue, hence its name. 

Stock. Same as Capital Stock. It is also used to denote the shares into 
which the Capital Stock is divided. 

Stockholder. The owner of one or more shares of the stock of a cor- 
poration. 

Stoppage in Transitu. A stoppage, by the seller, of goods sold on 
credit before reaching their destination upon learning of the buyer's 
insolvency. 

Stranger. In contracts a person who is not one of the parties to the 
contract. 

Sub-Agent. A person appointed by an agent to perform some duty 
relating to the agency. 

Sub-Contract. A contract made by one who has agreed to perform 
labor or service with a third party for the whole or part performance 
of that labor or service. ^ 

Subject-Matter. The thing to be done or omitted in a contract. 

Subornation of Perjury. Inducing or procuring another to commit 
perjury. 

Subrogation. The substitution of one person or thing in the place of 



DEFINITIONS. 183 

another, particularly the substitution of one person in the place of an- 
other as a creditor, with a succession to the rights of the latter. 
Suit. The prosecution of some claim or demand in a court of justice. 
Surety. One who has agreed with another to make himself responsible 

for the debt, default, or misconduct of a third party. Similar to 

guarantor. 
Suretyship. The liability or contract of a surety. 
Surrender Talue. The amount which an insurance company will pay 

for an unexpired policy. 
Tare. An allowance in the purchase and sale of merchandise for the 

weight of the package in which the goods are contained. It may 

also be an allowance for the waste or diminution in the quality or 

quantity of the goods. 
Tax Deed. A deed given by the officer of the law charged with the 

collection of taxes to the purchaser of land sold for taxes at a tax sale. 
Tenant. One to whom another has granted for a period, the use of cer- 
tain real estate. 
Tender. An offer of a sum of money in satisfaction of a debt or claim, 

by producing and offering the amount to the creditor and declaring 

a willingness to pay it. 
Testator. One who has died leaving a will. 
Tonnage. The carrying capacity of a vessel. 

Tort. A private wrong or injury other than the breach of a contract. 
Trade Mark. The symbol, emblem or mark which a manufacturer puts 

upon the goods he manufactures. 
Trespass. Any wrongful act of one person whereby another person is 

injured. 
Trustee. One who holds property for the benefit of another. 
Ultra Tires. The acts or proceedings of a corporation done beyond the 

scope of its powers* 
Underwriter. Same as Insurer. 
United States Note. A written promise to pay to the bearer on demand 

a certain sum of money, issued by the United States Government and 

used as money. 
Usage. In mercantile law the well known uniform practice, or the 

manner of performance of an act or contract. 
Use and Occupation. The liability of a tenant to pay a reasonable rent 

for the use and occupation of premises in case an agreement has been 

made for the use, but the rent not fixed. 
Usury. Illegal interest. 

Talidity. Legal strength or force; the quality of being good in law. 
Tallied Policy. One which fixes the value of the property insured. 
Tassal. One who held property of a superior or lord. 
Tendee. One to whom anything is sold; a purchaser; a buyer. 
Tendor. A seller; the person who sells a thing. 



184 BUSINESS LAW. 

Vendor's Lien. The equitable lien allowed the seller of land until the 
whole purchase money is paid. 

Void. Of no force or effect. 

Voidable. That may be avoided ; not absolutely void. 

Wager Policy. A policy of insurance in which the insured person has 
no insurable interest. 

Waiver. The abandonment of a right, or a refusal to accept it. 

Ward. A minor under guardianship. 

Warranty. An agreement to hold one's self responsible, if a certain 
thing does not turn out as represented. 

Waste. Spoil or destruction done or permitted to land or the buildings 
by a tenant. 

Wharfage. The compensation paid the owner of a wharf for the privi- 
lege of landing goods upon it, or loading from it. 

Wharfinger. The owner of a wharf who maintains it for the purpose 
of receiving and shipping merchandise. 






BUSINESS FORMS. 



PROMISSORY NOTE— NON-INTEREST BEARING. 

$125^V Detroit, Mich., June 30, 1891. 

Sixty days after date, I promise to pay to the order of E. R. 
Andrews, One Hundred Twenty-five y^o Dollars, at the Fourth 
National Bank, value received. 

S. B. Wilder. 

PROMISSORY NOTE— JOINT AND SEVERAL. 

$6000. Geneva, N. Y., Aug. 5, 1891. 

One year after date, ive jointly and severally promise to pay to 
the order of J. B. Ford, Six Thousand Dollars, value received, 
with interest. 

S. B. Martin, 
H. C. Parker. 

promissory note-not negotiable. 

$246^-. Dayton, Ohio, June 4, 1891. 

Six months after date, I promise to pay Horace G. Barton, 
Two Hundred Forty-six y^ Dollars, value received, with use. 

J. E. Kline. 

PROMISSORY NOTE— DEMAND. 

$3000. Clifton, N. Y., Sept. 1, 1891. 

On demand I promise to pay S. B. Smith, Three Thousand 
Dollars, value received, with interest. 

W. S. Hamilton. 

JUDGMENT NOTE. 

$800. Burlington, Vt., Oct. 2, 1891. 

Thirty days after date, I promise to pay R. W. Bradley, or 
order, Eight Hundred Dollars, with interest; and I do hereby 
confess judgment for the above sum, with interest and cost of 
suit, a release of all errors and waiver of all rights to inquisi- 
tion and appecd, and to the benefit of all laws exempting real or 

personal property from levy and sale. 

K. J. Conway. 

185 



186 BUSINESS FORMS. 

CHATTEL NOTE. 

$300. Newton, Iowa, Feb. 16, 1891. 

On or before July 1, 1891, for value received, I promise to 
pay Walter L. Jones, Three Hundred Dollars; to ie paid said 
Jones at my warehouse iy the delivery to him of wheat, com and 
oats, at current prices, One Hundred Dollars worth of each of the 
kin$s of grain mentioned. 

Julius E. Chamberlain. 

PROMISSORY NOTE— INDORSED. 

$100. St. Paul, Minn., May 1, 1891. 

Sixty days after date, I promise to pay to the order of H. W. 
Banning, One Hundred Dollars, at Fourth National Bank, 
New York City, value received. 

William H. Winslow. 




SIGHT DRAFT. 

$552^. Brockport, N. Y., June 30, 1891. 

At sight pay Edward Klix, or order, Five Hundred Fifty- 
two y 3 ^ Dollars, value received, and charge to my account. 

Geo. Graves. 
To M. L. Culver, 

Richmond, Va. 



BUSINESS FORMS. 187 

ACCOMMODATION NOTE — WITH INDORSEMENTS. 

$175.00. Portland, Me., July 18, 1891. 

Tliree months after date I promise to pay to the order of 

myself, _ 

One Hundred Seventy-five ■££$ Dollars, value 

received. Payable at Commercial Bank. 

F. *D. Livingston. 

Written across the back: F. D. Livingston, W. C. Goddard. 

TIME DRAFT - ACCEPTED. 

$321 T Vo. Buffalo, N. Y., July 10, 1891. 

At ten days' sight pay to Robert Thompson, or order, Three 
Hundred Tiventy-one I 1 u § - Dollars, value received, and charge to 
my account. 

To Amos Deming, John D. Marvin. 

Syracuse, N. Y. 

Written across the face of the draft: Accepted, July 15, 1891, 
payable at First National Bank, Amos Deming. 

CHECK— CERTIFIED. 

No. 1041. Sprin/gfield, Mass., July 25, 1891. 

FIRST NATIONAL BANK 

of Springfield. 

Pay to Cunningham & Co. , or order, One Hundred Seventy- 
one -^q Dollars. 
$171^. Edwards & Wheeler. 

Stamped or written across the face of the check* Good, 
A. B. Allen, Teller. 

GUARANTY OF PAYMENT. 

For value received, I hereby guarantee the payment of the 
within note. 

W. B. Wilson. 

GUARANTY OF COLLECTION. 

For value received, I hereby guarantee the collection of the 
within note. 

R. C. Spanton. 



]88 BUSINESS FORMS. 

RECEIPT — TO APPLY ON ACCOUNT. 

$35.00. Dayton, 0., June 30, 1891. 

Received of Henry B. Kane, Thirty-five Dollars, to apply on 
account. 

Upton" & Fairchild. . 

RECEIPT — IN FULL OF ALL DEMANDS. 

$113 T 3 oV Charleston", S. C., April 1, 1891. 

Received of Milton Barton, One Hundred Thirteen -^ Dollars 
in full of all demands against him. 

His 

Enos x Spinning. 

mark. 
RECEIPT — TO APPLY ON NOTE. 

$150.00. Bikghamton, T&. Y., Sept. 5, 1891. 

Received of Myron T. Bly, One Hundred Fifty Dollars to 
apply on his note, dated June 1, 1891, given to me, being the 
same payment which I have indorsed on said note. 

E. R. Pritchard. 

DUE BILL — PAYABLE IN MONEY. 

$75.00. Syracuse, N. Y., Sept. 13, 1891. 

Due Samuel R. Whitney, or order, Seventy five Dollars. 

W. B. Farnham. 

DUE BILL — PAYABLE IN GOODS.. 

$17-^0- Newark, N. J., Oct. 2, 1891. 

Due F. O. Henderson Seventeen Dollars in goods from my 
store. 0. B. Cheesman. 

EMPLOYMENT CONTRACT. 

This agreement made and entered into at Richland, Wisconsin, 
this tiventieth day of February, 1891, by and between Jerome B. 
Green, farmer, and Clayton Hopkins, laborer, both of Richland > 
Wis. , provides as folloivs : 

First. — That said Hopkins shall work as a farm hand on the 
premises of said Green, and as directed, in the usual manner, 
and for the usual hours accustomed in farm business, for the 
period of one year from date hereof. 






BUSINESS FORMS. 189 

Second. — For the services provided for, said Green agrees 
that during said year the said Hopkins may become as one of 
said Green's family, boarding and lodging therewith, and hav- 
ing all the usual privileges of farm laborers, and at the comple- 
tion of the yearns labor Green shall pay to Hopkins the sum of 
two hundred and forty (2J/D) dollars in full for his services. 

Third. — Neither party hereto shall have a right to terminate 
this contract before the expiration of the time, except for cause. 

Witness, Signed, Jerome B. Green, 

Louis H. Barnes. Clayton Hopkins. 

STOCK CERTIFICATE. 

JS T o. 185. Shares, 100. 

£hi£ %$ to (Silrttfj), that Elmer Sherwin is entitled to One 
Hundred (100) shares of the Capital Stock of The American 
Buggy Co., of Hartford, Conn., transferable in person or by 
attorney, on the books of said Company only upon the surrender 
of this Certificate. 

^fitt Wit\Xt#$ ty&Txtxtof , the said Company has caused this Cer- 
tificate to be signed by its President and Treasurer. 

Dated, Hartford, Conn., July 11, 1891. 
Byron Lloyd, Frank L. Jennings, 

Treasurer. President. 

TRANSFER OF STOCK. 



(Back of Certificate.) 
For value received, I hereby assign and transfer to M. E. 
Jones 100 shares of the Capital Stock represented by the 
within Certificate, and do hereby constitute and appoint 
Daniel Osborne, Attorney, to transfer the said stock on the 
books of the within-named Company, with full poiver of sub- 
stitution in the premises. 

Elmer Sherwin. 
Bate, July U, 1891. 
Signed in the presence of 

M. D. Brown. 



190 



BUSINESS FORMS. 



PROTEST. 



ss. 



United States of America. 

®a nil to whom these presents shall come, ^e it ^noum, That 
on the tenth day of July, in the year of our Lord one thousand 
eight hundred and ninety-one, at the request of ©he ^o\l\tX$ 
thereof, I, 0. B. Banning, Notary Public, duly commissioned 
and sieorn, dioelling in the City of Albany, did present the 
original note, hereunto annexed, to the teller at Traders National 
Bank, in this City (where the same is payable) and did demand 
payment thereof, which teas refused. 

WlXtxt\\yttVi f I, the said Notary, at the request aforesaid, did 
§?V0tC£t, and by these presents do publicly and solemnly ^xutt&X 
as well against the Maker and Indorsers of the said note, as 
against all others whom it doth or may concern, for exchange, 
re-exchange, and all costs, charges, damages and interest, already 
incurred, and hereafter to be incurred, for want of payment of 
the said note. 

$lut£ §ont ntlA ^X0tt$tt& f at Albany, N. Y., the day and year 
first above written. 

$u Scsthnonium Wtxiti\tx$x 0. B. Banning, 

Notary Public. 

Please give notice of this Protest to all parties to { 
the within Note as soon i is you receive th is. f 

Back of Protest. 









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BUSTXESS FORMS. 



191 



This ; s a temporary receipt, and can be surrendered In exchange for the Company's Bill of Lading 
under the terms of which the shipment Is made and the goods accepted by the carrier. 



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192 



BUSINESS FORMS. 



ABSTRACT OF TITLE. 



Examination of Title 

to 

part of section No. 85, Township No. 82 S., Range No. 27 E., 

State of Florida. 



The 



2. 



Land Patent Certificate No. 

10715. 
Dated, March 80, 1875. 
Consideration $10,000.00. 
Recorded, April 20, 1875, in 

book J of deeds, at page 85. 
Conveys said section 85, tvith other property. 



United States of America 
to 
Hamilton Disston. 



Hamilton Disston and tvife 
to 
The Florida Land and Improve- 
ment Company. 



Conveys said Sec. 85, with other property. 



Quit Claim deed. 
Dated May 2, 1880. 
y Consideration $5,000.00. 
Recorded, May 20, 1880, in 
booh K of deeds, at page 58. 



Warranty deed. 
Dated, April 1, 1885. 
Consideration $500.00. 
Recorded, April 10, 1885, in 
booh Kof deeds, at p. 851. 



S. 

The Florida Land and Improve- 
ment Company 
to 
Arthur G. Clement. 
Conveys the N. W. quarter of the S. W. quarter of said section 
85, containing lfi acres according to the government survey. 

I, Geo. W. Hendry, Clerk of the Circuit Court, in and for 
the County of DeSoto, State of Florida, hereby certify that I 
have carefully examined the records in my office, and I find noth- 
ing of record affecting the title of the premises described in No. 
8, in the foregoing abstract, from and including March 80, 1875, 
in the names of Hamilton Disston, The Florida Land and Im- 
provement Co., and Arthur G. Clement, other than is set forth 
in the foregoing three abstracts, and I further certify that I find 
no judgments, mortgages or liens, or incumbrances, from and 
including said date, against said persons and premises, excepting 
as is hereinbefore set forth, to and including this date. 
Dated, June 1, 1891. GEO. W. HENDRY, 

[seal.] Clerk of the Circuit Court. 






BUSINESS FORMS. 193 

ARTICLES OF COPARTNERSHIP. 

gltticlCjS of ffiaiwvtnevslup made this 1st day of June, 1891, 
between Daniel Ii. Clark and Charles F. CrandaU, both of the 
City of Buffalo, X. Y., witnesseth: 

I. The parties above named have agreed to become copartners 
in business, and do hereby agree to be copartners under the firm 
name of Clark and CrandaU, in the business of manufacturing, 
buying and selling paints, oils and painters' supplies, and con- 
ducting a general paint and oil store in said City of Buffalo, 

II. TJie partnership hereby formed shall commence at the date 
hereof and continue for the term of five years, unless sooner dis- 
solved by the operation of lata. 

Ill Said CrandaU shall contribute to the partnership capital 
the sum of Twentyfive (25) Thousand Dollars in cash, and said 
Clark shall contribute the sum of Five (5) Thousand Dollars in 
cash, and his skill and knowledge of the business, and the con- 
tribution of said Clark as aforesaid is deemed equal to the con- 
tribution of said CrandaU. 

IV. It is agreed that said Clark shall devote his whole time 
and energy to the conduct of the business and the futherance of 
its success, but said CrandaU shall not be under obligation to 
devote more than one-half of his time in attention to the partner* 
ship business, and each of said partners may draio out of the 
business not to exceed $25 weekly for personal expenses. 

V. It is agreed that each of said partners shall pay and dis- 
charge equally all rents and expenses of conducting the business, 
and all gains and profits which shall arise from the business 
shall be equally divided after the payment and discharge of all 
losses by ill commodities, bad debts, or otherwise, and all such 
losses, and all losses arising from the conduct of the business 
shall be born and shared equally between the partners. 

VI. It is mutually agreed that true books of account shall be 
kept wherein each of the said partners shall enter all moneys by 
them or either of them received, paid, laid out or expended in 
and about said business, as also all goods, ivares and merchan- 
dise by them or either of them bought or sold, by reason or on 
account of said business, and all matters and things whatsoever 
pertaining to said business, and that either of said partners 



194 BUSINESS FORMS. 

shall at all times have free and uninterrupted access to said 
looks, and at the end of each quarter hereafter, each of said 
partners shall make and render to the other a true and correct 
account of all profits and increase by them or either of them made, 
and of all losses by them or either of them sustained, and of all 
payments, receipts and disbursements whatsoever connected with 
said business. 

VII. It is further agreed that neither of said partners, dur- 
ing the conduct of said business, shall indorse any note or become 
surety for any person without the consent of the other, and 
neither of said partners shall give the firm note without the 
knowledge and consent of the other. 

VIII. It is mutually agreed that at the end of said partner- 
ship each of said partners shall make and render to the other a 
just and final account of all things relating to the said business, 
and there shall be an equal division of the partnership capital 
and the increase thereof, and an equal bearing and sharing of 
the losses and liabilities. 

$tt 3t#ito## xrfxtxtof, the parties hereto have hereunto set their 
hands and seals in duplicate, the day and year first above ivritten* 
DANIEL E. CLARK. [seal.] 

CRARLES F. CRANDALL. [s^al.J 

CHATTEL MORTGAGE. 

©a %\\ to Wfemtt thes* fmttttts ^tall $am* : Know Ye, That 
I, John McLachlan, of Lyons, County of Wayne, N. Y., am 
indebted unto George G. Wanzer, of Palmyra, in the sum of 
three hundred and ten dollars and fifty cents, being for the rent 
of the farm noiv occupied by me, and seed wheat furnished to me 
by said Wanzer. 

Now for securing the payment of said debt, and the interest 
thereon from the date hereof, to the said G-eokge G. Wanzer, 1 
do hereby sell, transfer and assign to the said Wanzer the prop- 
erty described in the following schedule, viz.: 

One top buggy, one lumber wagon, and one yoke of red oxen : 

Provided always, and this mortgage is on the express con- 
dition, that if the said John" McLachlan shall pay to the 
said George G. Wanzer, his assigns or representatives, the 
sum of three hundred and ten dollars and fifty cents, with 



BUSINESS FORMS. 195 

interest thereon, six months from date, which the said John 
McLachlau hereby agrees to pay, then this transfer to be void 
and of no effect; but in case of non-payment of the said debt and 
interest at the time above mentioned, then the said George G. 
Waxzer shall have full power to enter upon the premises of the 
said party of tlie first part, or any otlier place or places where the 
goods and chattels aforesaid may be {to take possession of said 
property); to sell the same at ptiblic or private sale, and the 
avails [after deducting all expenses of the scde and keeping of the 
said property) to apply in payment of the above debt; and in case 
the said George G. Waxzer shall at any time deem said prop- 
erty or debt unsafe, it shall be laivful for him to take possession 
of such property and to sell the same at public or private sale 
previous to the time above mentioned for the payment of said debt, 
applying the proceeds as aforesaid, after deducting all expenses 
for the sale and keeping of the said property. And the said 
mortgagee, his representatives or assigns, may purchase at any 
such sale, in the same manner and to the same effect as a person 
not interested herein. 

If from any cause said property shall fail to satisfy said debt, in- 
terest, costs and charges, I covenant and agree to pay the deficiency. 
Jftt Witn^S Wlxtttof f I have hereunto set my hand and 
seal the 15th day of September, in the year of our Lord 
one thousand eight hundred and ninety-one. 
Sealed and delivered ) 

in presence of \ John McLachlan. [SEAL.] 

Amos H. Coolidge, Lyons, N. Y. 

It is usual to have a chattel mortgage acknowledged, and it is advisable 
that it should be. The form of acknowledgment already given may be 
used (p. 58). It is necessary to file a chattel mortgage in the office 
of the town clerk of the town where the property is situated, or in such 
other office as may be designated by law, in order to make such mortgage 
valid as against subsequent claimants and purchasers in good faith. 



INDEX TO BUSINESS FORMS. 






Abstract of title.. 192 

Accommodation note 187 

Acknowledgment 58 

Articles of copartnership 193 

Assignment of note 48 

Bank check 46 

Bill of exchange, foreign . 41 

Bill of exchange, inland 40 

Bill of sale 58 

Bond, debt secured by mortgage 140 

Certificate of stock 189 

Certified check 187 

Chattel note . 186 

Chattel mortgage. _ . 1 194 

Contract of guaranty 84 

Deed, warranty 130 

Deed, quit claim : J 33 

Discharge of mortgage 142 

Draft 40 

Draft, accepted 187 

Due bill 188 

Employment contract 188 

Guaranty of payment 187 

Guaranty of collection , _ . 187 

Indorsements 186 

Judgment note __ 185 

Land contract. _ 146 

Lease 149 

Memorandum of sale 57 

Mortgage, land r. 138 

Note, promissory. 38, 185 

Notice of protest 44 

Notice to tenant 153 

Notice of stoppage in transitu 64 

Power of attorney 66 

Protest for non-payment 190 

Receipt 1 88 

Shipping receipt. _ _. 191 

Sight draft 186 

Time draft 187 

Transfer of stock 189 

Waiver of protest 185 

196 






ISTDEX. 



A. PAGE. 

Abandonment - 106 

Absence of debtor 28 

Acceptance of proposition 11 

must be unqualified 12 

how accepted 12 

when accepted 12 

Acceptance of draft _ _ 41 

definition 42 

presentment for _ 42 

time of presentment _ 42 

conditional acceptance. 43 

Absolute acceptance 43 

non-acceptance 43 

form of acceptance 42 

Acceptance of dedication 160 

acceptor 43 

Accident insurance 100 

accommodation paper _ 52 

Acknowledgment, 

of deeds 135 

of mortgages 138 

Act of God, 

definition 90 

excusing carriers 90 

Administrator, 

definition _ _ _ _ 167 

transferring paper 49 

Affidavit, 

definition 167 

Agent, 

definition 66 

appointment of 66, 67 

authority of 67, 68 

proof of authority 68 

liability of 69 

general and special agents. __ 68 



PAGE. 

Agency, 

definition 66 

termination of 70 

Agistor, 

definition 98 

liability of 98 

Alien, 

definition. _ 167 

incompetency of 10 

Amount, 

of negotiable paper 34 

how stated 34 

Application of payments, 

definition 25 

by the creditor 25 

by the debtor _ _ 25 

by the law 25 

Appurtenance, defined 167 

Application for insurance, 

untruths in 100 

Articles of copartnership 72 

Assent, 

mutuality of _ 11 

requisites of 11 

how effected 11,12 

must be free will 12 

fairly obtained 12, 13 

Assignment, 

fraudulent 20 

of negotiable paper 48 

of mortgage _ 141, 142 

of lease 152 

of insurance policies 100 

Attorney in fact, defined 168 

Auctions, 

puffers and by-bidders at 20 



197 



198 



INDEX. 



B. 

PAGE. 

Baggage, 

of passengers 92 

of guests 93, 94 

Bailee, denned ..- 168 

Bailment, defined _ 168 

Bank note, defined __ 168 

Bankruptcy, 

definition 168 

effect on agency 70 

Beneficiary, in insurance 98 

Bets 18, 19 

Beyond seas, defined 168 

Bill of exchange, 

definition L__ 40 

foreign and inland 40, 43, 44 

form of _40, 41 

maturity of _ _ _ _ 41 

presentment of 41, 42 

acceptance of 42, 43 

protest of. 43 

notice of protest of 44, 45 

Bill of lading, defined 168 

Bill of sale, form of 57, 58 

Bills receivable, defined. 168 

Blank indorsement 50 

Blockade, defined ..__ 168 

Boarding-house, 

distinguished from inn 94 

Boarding-house keeper, 

rights and liabitities 94 

Bona fide holder, 

definition 50 

requisites of 50, 51 

result of 51 

Bond, 

definition _._ 169 

with mortgage 140 

Broker, defined 169 

Body corporate, see Corporation. 
Breach of contract, 

definition 29 

action for.__ _ __ 29 

Breach of warranty 29, 64, 65 



PAGE. 

By-bidder, see Auction. 
By-laws, see Corporations. 

C. 

Capital of partnership 72, 75 

Capital stock, 

defined _... 80 

transfer of 80 

liability of owner _ _ 80 

Carrier, 

defined 89 

inland 89 

by sea _ . . 89 

see common carriers 170 

Caveat emptor, 

defined , 169 

application 63 

Certificate of stock, 

defined -- 169 

transfer of _ 80 

Certification of check, 

definition 47 

liability of bank 47 

Charter, of corporation 78 

Charter party, defined 170 

Chattel, defined 170 

Chattel real, defined 170 

Chattel mortgage, 

definition 105 

riling of - 105 

Checks, 

definition 45 

post dated . _ 45 

form of - -_ 46 

liability of drawer 46 

presentation of 46, 47 

certification of 47 

hints about use of _ ___ 47 

transfer of _ 48 

indorsement of 49 

stopping payment of 47 

Children, 

earnings of 116 

duties of to parents. _ 116 

guardian of 116 



IXDEX. 



199 






PAGE. 

Collateral, 

definition 170 

promise 85 

Collection, guaranty of 87 

Commercial Law, 

reason for 5 

source of 5 

Commercial paper, see Negoti- 
able paper. 

Commissioner of deeds 135 

Common carriers, 

definition of 89 

obligations of _ . 89 

obligation to carry 89 

compensation of 89, 90 

the contract of 90 

liability of 90 

limitation of liability 91 

delivery by 91 

lien of __ __ 91, 92 

Common law _ 5 

Company, see Corporation. 

Compound interest, 

definition 108 

when allowed 108 

Concealed partner, defined 74 

Concealment of facts, 

affecting contracts 13 

affecting insurance _. 100 

Conditional sale, 

definition _ 60 

instances of _ _ 60 

Conflict of Laws, 

affecting contracts 22 

affecting interest 108 

affecting marriage and di- 
vorce 114 

Consent, see Assent. 

Consideration, 

elements of a contract _ 7 

definition 13 

sufficient consideration 14 

good consideration. 14 

valuable consideration 14 



PAGE. 

consideration of guaranty 86 

invalid consideration 15 

failure of consideration 15, 16 

Constructive delivery, defined. 61 

Contracts, 

definition of _. 6 

oral _ 6 

written _ 6 

by specialty 6 

oral and parol distinguished. 7 

express and implied 7 

executed and executory 7 

elements of 7 

parties to 7, 8 

contracts by infants 8 

by married women 9 

by alien enemies. _ _ 10 

by idiots and lunatics 10 

by drunken persons. _ 11 

mutual assent in 11 

consideration of 13 

the subj ect matter of. __ 16 

in restraint of marriage __•___ 17 

in restraint of trade 17 

perversive of justice 18 

immoral 18 

gambling 19 

fraudulent 19 

hints about making 22 

rescission of _ 64 

Copartnership, see Partnership. 

Copyrights, 
distinguished from patents. _ 120 

how obtained 121 

to whom granted 121 

duration 121 

transfer of 122 

infringement of 122 

validity of 122 

Corporate seal, see Corpora- 
tions. 

Corporations, 

definition 77 

object of 77 



200 



INDEX. 



PAGE. 

kinds of _ * 77 

description of 78 

powers of 78 

government of 79 

capital stock of . 80 

seal of 80 

administration of : 81 

Course of exchange, defined. .. 171 

Covenants, 

definition of 129 

effect of 129 

personal 129 

running with land. _ 129 

Coverture, 

disability of _ 9 

D. 

Damages, 

definition of 171 

for breach of contract 30 

for breach of warranty 65 

liquidated 30 

exemplary 30 

Date of negotiable paper 34, 45 

Days of grace, 

definition _ 39 

when allowed .39, 41, 45 

Death, 

effect on agency _ 70 

effect on partnership. 75 

effect on corporation 77 

effect on joint stock com- 
pany , 81, 82 

Debtor, absence of 28 

Deceit, 
effect on contract 19 

Debts, 
outlawed 27 

Deed, 

title by _ 126 

definition _ 127 

parties to _. 128 

form of __. 128 

requisites of 128 



PAGE. 

covenants in 129 

kindsof 129 

warranty 129, 130 

form of warranty 130 

full covenant 131 

quitclaim 133 

execution of 134 

delivery of 135 

acknowledgment of 135 

recording of 136 

deed of highway 160, 162 

Defenses 29 

Delivery, 

of property sold _ _ 60 

time of_ 60, 61 

fraudulent 61 

constructive 61 

by carrier 91 

Demand of payment, 

of notes 39 

of drafts 41 

of checks 46 

Demurrage, defined 172 

Deposit, definition _ 172 

Description in deed 128, 162 

Deviation, defined 172 

Director of corporation, defini- 
tion 79 

Disability to contract, 

legal disability _ 8 

natural disability 8, 10 

Disaffirmance of contracts 9 

Discharge of mortgage 142 

Discharge of employee 110 

Discount 39 

Dishonored paper 43, 44, 172 

Dissolution of agency. . : 70 

Dissolution of partnership 75 

effect of 75 

Dissolution of corporations 81 

Distress for rent ..153, 172 

Divorce ■ 114 

Domestic bill of exchange 40 

Domestic relations, defined 172 



. 



INDEX. 



201 



PAGE. 

Dormant partner 74 

Dower 125, 17:5 

Draft, see Bill of Exchange. 

Drawer and Drawee 37 

Drawer's contract 37 

Drawee's contract 4:> 

Drunken persons, 

contracts by 11 

wrongs committed by 11 

guardians for __ II 

Duress, definition 173 

effect on contracts 12 

legal imprison ment not 12 

E. 

Easement, 

definition .124, 173 

instances of ___ 127 

Emblements, defined 173 

Eminent domain, defined 173 

Employer and employee. . _109-113 

the contract between 109 

employee's compensation. 109, 110 

employee's obligations 110 

employer's obligations. _. 110, 111 

employee's risks 111 

employee's liability 112 

employer's rights against third 

persons 112 

employer's liability for em- 
ployee's acts 112, 113 

Estates in land, see real prop- 
erty. 

Estates for life 124, 125 

Estates for years 150 

Eviction of tenant, 

actual _ _ 155 

constructive 155 

result of _ 155 

Executed and executory con- 
tracts 7 

Executed and executory sales __ 60 

Execution, 
of instruments generally 173 



PAGE. 

of deeds 134 

of mortgages 138 

Executor, definition 1 73 

transferring negotiable paper 50 
Exemplary damages, see Dam- 
ages. 
Express contract 7 

F. 

Factor, defined 174 

Failure of consideration 15 

False representations, 

in sales 62 

in insurance 100, 101 

Fee-simple _124, 174 

Fire insurance, 

definition 98 

the contract of _ _ _ 98 

usual conditions of 99 

fraud and concealment affect- 
ing 100 

Fixtures 156, 157 

definition of 156 

instances of 156 

a grantee's fixtures 156 

a tenant's fixtures 157 

a landlord's fixtures 157 

Foreclosure of mortgage. __ 137, 138 

Foreign bill of exchange, 

definition 40 

drawn in sets 41 

protest of 43, 44 

Forged paper 52 

Found paper. 52 

Forwarders, definition 96 

liability of 97 

Fraud, 

affecting contracts 12, 19 

definition of 18 

affecting sales 64 

affecting insurance 100 

fraud of agent 69 

of employee 112 

Frauds, statute of 20, 22 



202 



INDEX. 



a. 

PAGE. 

Gambling contracts, 

when void 18, 19 

stock and grain gambling ... 19 

Gifts ..--- 14 

Good consideration 14, 15 

Good will, defined 174 

Gratuitous services 109, 110 

Guaranty and suretyship 84-88 

definition 84 

formation of contract 84 

parties to 85 

consideration of 86 

liability of sureties 86 

rights of sureties 86 

rights between sureties 86, 87 

discharge of sureties 87 

Guaranty of payment and col- 
lection 87, 88 

Guardians . 11, 116 

Guest, 

definition of 93 

rights of 93, 94 

baggage of _ 94 



Highways 160-165 

definition of _ _ _ 160 

how established 160 

highways by deed 160 

by dedication 160 1 

by prescription 161 

by statute 161 

ownership of soil of _ 161 

closing of 162 

when included in deed 162 

obstruction of 163 

right of way in 163 

repair of . _163, 164 

vehicles and predestrians in. 164 

vehicles and street cars in. __ 165 

rate of speed in 165 

Hiring of things, 

definition __ 95 

hirers liability 95 



PAGE. 

Hiring of services, 
definition __ 96 

workman's liability 96 

Hiring of custody, 

definition. 96 

duty undertaken 96, 97 

Hotel, see Inkeeper. 

Husband, 

duties and liabilities of 114 

rights of 115, 116 

I. 

Idiots, 

definition 175 

incompetency of r 10 

necessaries purchased by 10 

committees of 11 

Ignorance of fact and law 13 

Illegal contracts 16, 18, 19 

Implied contract 7 

Imprisonment for debt, see 

Poor debtor. 
Indemnity bond, see Guaranty. 
Indorsement of negotiable 
paper, 

without recourse 48 

usual method of transferring 48 

definition of 49 

the liability assumed 49 

steps to charge the indorser. _ 49 

indorsement in blank 50 

restrictive indorsement 50 

Indorser, 

definition _ 36 

entitled to notice 37 

liability of 49 

conditions of liability 49 

Infants, 

incompetent to contract 8 

contracts for necessaries 8 

what are necessaries __ 8 

disaffirmance by 9 

wrong doings by 9 

guardians for 11, 116 



INDEX. 



203 



PAGE, 

wages of _- 109 

Injunction, defined. 175 

Inland bill of exchange, see 
Domestic bill of exchange, 

Inkeepers _ 93-94 

definition of 93 

liability to receive guests 93 

liability for baggage 93 

limitation of liability 94 

lien of 94 

Insolvent laws, contracts per- 
versive of, void 20 

Insurable interest, defined 175 

Insurance, 

definition of _ 98 

life insurance, definition 98 

fire insurance, definition 98 

policies of insurance 98, 99 

conditions of fire insurance. 99 
conditions of life insurance. _ 99 
fraud and concealment in ap- 
plication for 100 

accident insurance 100 

Insurer. 98 

Insured 98 

Intention of parties, 

affecting contracts 22 

affecting fixtures _. _ 157 

Interest and usury 106-108 

definition of interest 106 

rate, how fixed 106 

when interest allowed 106 

definition of usury 106, 107 

interest upon interest 108 

result of usury 108 



Joint stock companies, 

definition of . . 81 

liability of stockholders in__ 81 
distinguished from corpora- 
tions. 82, 83 

Joint tenants, defined 175 

Judgment, defined 176 



PAGE. 

Land contract 144-147 

must be in writing 144 

signed 144 

a sufficient writing 144, 145 

insufficient writing ._ 145 

contract without writing 145 

form of land contract 146 

execution of 147 

Landlord, see Innkeeper. 

Landlord and tenant 148-155 

definition of landlord 148, 176 

definition of tenant 148, 183 

the contract between 148 

formation of the contract. ._ 148 

kinds of tenants 150 

the rent _ 151 

sub-tenants 152 

sale subject to lease 152 

removal of tenant 1 52 

notice to quit _. 153 

waste _ 153 

repairs. 154 

eviction of tenant 155 

Law, 
source of commercial law ... 5 
statute law 5 

Law of place, see Conflict of 
laws. 

Law merchant, defined.. 176 

Lay corporation, defined 176 

see also Corporations. 

Lease, 

definition 148 

the parties to 148 

verbal lease 148 

when must be in writing. _ .20, 21 

term of lease 151 

assignment of lease __. 152 

lease compelling repairs 154 

Legal capacity to contract 8 

Letter of credit, defined 176 

Letters patent 120, 123 

see also Patents. 



204 



INDEX. 



PAGE. 

Liens, 

definition _ ..._102, 176 

when possible 102 

creation of 102 

created by law 102 

by usage 102 

by agreement of the parties.- 102 

general and special 102 

requisites of 103 

waiver of 104 

Life insurance _ _ _- 98, 101 

definition 98 

the contract of 98 

policy of 98, 99 

usual conditions of 99 

fraud and concealment in___ 100 
representations and warran- 
ties 100 

hints about ....100, 101 

Life tenant _ 151 

see also Estates for life. 

Limitation of time to sue, see 
Statute of limitations. 

Limited partnership ... 74 

Liquidated damages, see Dam- 
ages. 

Loans, see Interest and usury. 

Lobbyists, contracts for services 
of 18 

Lost negotiable paper 52 

Lucid intervals, defined 177 

Lunatics, 

definition 177 

incompetent to contract 10 

necessaries for 10, 11 

committees of 11 

M. 

Maker of note 36 

Manner of making payments, 

see Payments. 
Marine insurance, 

definition 98 

see also Insurance. 



page. 

Maritime law, defined 177 

Marriage, 
promises in consideration of. 22 

contracts in restraint of 17 

contract of 114 

law of place affecting 114 

Married women, 

contracts by 9 

services of 115 

Master and servant 109-11& 

see also Employer and em- 
ployee. 

Material men, defined 177 

Maturity of negotiable paper. 39, 41 
see also Days of grace. 

Merger, defined 177 

Minors, see Infants. 

Mistake of law and fact 13 

Mortgages, 

real estate 137-143; 

their nature 137 

defeasance of 137 

power of sale and redemp- 
tion 137, 138 

execution and delivery of___ 138 

usual form of 138 

interest clause 140 

tax and insurance clause 140 

bonds with 140 

assignment of 141 

priority of. 142 

discharge of 142 

chattel mortgage, see Chattel. 

Mortgagee, defined 137, 178 

Mortgagor, defined 137, 178 

Mutual assent, see Assent. 

N. 

Necessaries, 

of infants. 8 

of idiots and lunatics 10 

of wife r 114 

Negligence, 

of carriers 90 



INDEX. 



205 



PAGE. 

of agents. _ 70 

of employees 110 

of co-employees _. : 111 

of hotel keepers .93, 94 

Negotiable words 33, 38, 46 

Negotiability, 

test of 33 

result of 33 

Negotiable paper 33-54 

its origin. _ 33 

amount of 34 

absolute payment of 34 

date of 34 

time of payment of 34, 35 

non-essential parts of ... 35 

assignment of 36 

parties to 36 

bolder of _ _ __ 37 

transfer of 48 

indorsement of 49 

bona fide holder of 50 

lost and stolen _ _ 52 

forged 52 

guaranty of. 52, 53 

accommodation paper 52 

non-negotiable paper ...__. 35, 36 

New promise, to pay outlawed 

claim 28 

Nominal damages, defined 178 

Non-acceptance, 

of bill of exchange _ _ 43 

steps to be taken on .43, 44 

Non-negotiable paper 35 

assignment of 36, 48 

non-payment of notes and 
bills 40, 43,44, 45 

Non-user, defined 178 

Notes, 

definition _ 37 

form of. _ 38 

negotiable words in. _ . 38 

interest on _ 39 

maturity of _ 39 

presentment of 39 



PAGE. 

lost 52 

accommodation _ 52 

guaranty of 53 

Notice of non-payment, see Non- 
payment. 

Notice to agent 68 

Nuisance, 

definition _ 158 

instances of 158 

damage by 158, 159 

public and private 159 

abatement of 159 

O. 

Obligation, moral _ 27 

Obscene publications _ 18 

Offer and acceptance 11 

how made 12 

by mail. 12 

see also Acceptance of propo- 
sition. 
Officers of corporations, see 
Corporations. 

Offset --.. 28 

On approval sales .59, 60 

Oral contract 6, 7 

Order, notes and drafts... 33, 38, 46 

Ostensible partner 74 

Outlawed debts, 

reason for them 27 

when outlawed 27 

computation of time 27 

absence of debtor affecting _. 28 

new promise reviving 28 

Ownership of real estate... 124, 125 

P. 

Par, defined 179 

Parents, 

duties of Ho 

rights of - H6 

Partners, 
contract of 12 



206 



INDEX. 



PAGE. 

dormant 74 

ostensible 74 

liability of 74 

power of 74, 75 

Partnership, 

contract of 72 

formation of 72, 73 

articles of 72 

testof . 73 

dissolution of 75 

effect of dissolution 75 

Party wall, defined.. - 179 

Par value, see Par, 

Passengers, 

right to transportation _ 89 

fare of _. 89, 90 

contract with 90 

baggage of 92 

Patents, 

definition of 120 

patentability. 120 

how obtained 121 

to whom granted 121 

duration of . 121 

transfer of 122 

validity of 122 

Pawn and pawn broker, see 
Pledging of personal prop- 
erty. 

Payee, 

definition of 36 

Payment, 

in money 23 

in property 23 

by note 23 

manner of making 23, 24 

presumption of 24, 25 

application of 25 

tender of 25, 26 

Per cent., defined 179 

Performance of contract, 

as a defense 29 

specific performance 30 

Perils of the sea, defined 179 



PAGE. 

Personal property, 

definition of 55 

see Sales of, 

Piracy, defined 179 

Pledging of property, 

definition of _ 104 

contract of 104 

enforcement of 104, 105 

Policy of insurance, see Insur- 
ance. 

Post dated checks, see Checks. 

Power of attorney, 

definition of 66 

form of. 66, 67 

acknowledgment of 67 

Power of agent, see Agent. 

Powers of corporations, see 
Corporations. 

Powers of partners, see Partners. 

Premium, defined 180 

see also Insurance 

Prescription, 

title by 126 

distinguished from deed 126 

highways by 161 

Presentment for acceptance, see 
Acceptance. 

Presentment for payment, 

of notes 39 

of checks 46 

Price, defined 55, 180 

in sales 56 

Primary liability, see Guaranty. 

Principal and agent, see Agent. 

Principal, see Interest. 

Principal, see Guaranty. 

Private road, see Easement. 

Promise, to pay another's debt. 21 

Promissory note, see Notes. 

Profits, see Partnership. 

Property, 

personal, defined _ 55 

real, defined 124 

tender of 126 



IXDEX. 



207 



PAGE. 

Proposition, see Offer. 

Proof of deed 135 

Protest, see Notice of protest. 
Public policy, contracts against 16 

Q. 

Qualified acceptance 43 

Quasi corporation, defined 180 

Quit claim deed, defined 180 

effect of ._ ___ 133 

R 

Ratification, 

by infants 9 

by principal 69 

Real covenants, defined 180 

Real estate, 

defined 124 

title to 125 

kinds of interest in 124 

Receipt, 

as proving payment 24 

check as receipt 47 

Recording, 
of deeds and mortgages __ 136, 138 
object of recording 136 

Recoupment 28 

Redemption, 

by mortgagor 137 

of property pledged 105 

Receiver, defined 181 

Reinsurance, defined 181 

Release, defined 181 

Remedy, 

defined 181 

for breach of contract 29 

Rent, see Landlord and tenant, 
and Lease. 

Renunciation by agent 70 

Rescission of contracts, defined 181 

Rescission of sale 64 

Repairs, see Landlord and 
tenant. 

Revocation of agency 70 

Right of lien, see Lien. 



PAGE. 

Right of survivorship, defined. 181 
Right of way 124 

Riparian owners, defined. _. 181 

S. 

Sales of personal property 55-65 

definition 55 

requisites to the contract 55 

when must be in writing. _ .20, 22 

parties to 55 

subject matter of 56 

when contract must be ir 

writing 57 

bill of sale 57, 58 

sales on trial 59 

of goods to arrive 59 

by sample _' 59 

conditional sales 60 

executory sales 60 

warranty in sales 62, 63 

rescission of sales 64 

Salvage, defined 181 

Seal, 

definition 181 

affixed to contracts 6 

Servant, see Employer and em- 
ployee. 

Set-off 28 

Sharing of profits, see Partners. 

Sight draft 41 

Signature, forgery of 52 

Skill of employee 110 

Slander, defined 182 

Slander of title, defined 182 

Smart money, defined 182 

see also Exemplary damages. 
Special agent, see Agent. 
Special partner, see Partners. 

Specialty, contracts by 6 

Statute law 5 

Statute of frauds, 

definition 20 

its requirements 20 

what is a sufficient writing. _ 21 



208 



INDEX. 



PAGE. 

Stockholders, see Corporations. 

Stolen paper 52 

Stoppage in transitu, 

definition 63, 64 

exercise of the right _ _ _ 64 

Stopping payment of check 47 

Streams, see Riparian owners. 

Street, see Highways. 

Strikes, unlawful 18 

Subject matter of contracts, 

definition 16 

what it may be 16 

illegal subject matter 16 

Sub-agent, defined 182 

Subrogation, defined 182 

Sub-tenant 152 

Sunday, 

desecration of 18 

contracts made on ; 18 

Surety, see Guaranty and surety- 
ship, 

T. 

Telegraph and telephone com- 
panies 117-119 

nature of the business. 117 

the contract undertaken. 117, 118 

liability of the company. 118 

limitations of liability 119 

Tenant, see Landlord and tenant. 

Tender of payment, 

definition 25 

requisites of _ 26 

Tender of property 26, 27 

Trade, in restraint of 17 

, Trade marks 120-123 

definition * 120 

how obtained 121 

object of ._ 121 

to whom granted 121 

infringement of 122 

validity of 122 

Transfer, 

of negotiable paper 48 

of non-negotiable paper 36, 48 



U, 

4 PAGE. 

Usage, defined f 183 

Usury, 

definition 106 

what is not usury 107 

result of usury 108 

Use and occupation, defined. __ 183 

V. 
Valuable consideration, 

definition 14 

the benefit of 14 

Value received, meaning 35 

Valued policy, defined 183 

Vendor and vendee, see Sales 
of personal property. 

W. 
Wagers, law of 18, 19 

Ward, see Guardian 

Waiver of notice of protest 45 

Waiver of lien, see Lien. 

W arehouseman, 

definition 96 

duties of. 96 

liability of 97 

Warranty in sales of personal 
property, 

definition 62 

representation of sale in 62 

what may constitute 62 

express warranty 63 

implied warranty 63 

warranty of title 63 

breach of warranty 65 

Warranty in insurance. . _ 100 

Warranty deeds, see Deeds 

Way, see Right of way. 

Wharfinger, 

definition. _ .96, 184 

duties of 96 

liability of .. 97 

Widow, dower of, see Dower. 

Withdrawal of offer ... 12 

when possible - 12 



